Year-on-Year Inflation-Indexed Swap

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The Year-on-Year Inflation-Indexed Swap (YYIIS) is a standard derivative product over Inflation rate. The underlying is a single Consumer price index (CPI).

It is called Swap because each year there is a swap of a fixed amount against a floating amount. But in reality only a one way payment is made (fixed amount - floating amount).

Detailed flows[edit]

  • Each year, at time
    • Party B pays Party A the fixed amount
    • Party A pays Party B the floating amount

where:

  • K is the contract fixed rate
  • N the contract nominal value
  • M the number of years corresponding to the deal maturity
  • i the number of years (0 < i <= M)
  • is the fixed-leg year fractions for the interval [Ti−1, Ti]
  • is the floating-leg year fractions for the interval [Ti−1, Ti]
  • is the start date
  • is the time of the flow i
  • is the maturity date (end of the swap)
  • is the inflation at start date (time )
  • is the inflation at time of the flow i (time )
  • is the inflation at maturity date (time )

See also[edit]



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