Inflation Derivatives

Inflation Derivatives
A subclass of derivative that is used by individuals to mitigate the effects of potentially large levels of inflation. The most common type of inflation derivatives are swaps, in which a counterparty's cash flows are linked to a price index and the other counterparty is linked to a conventional fixed or floating cash flow.

Many investors prefer inflation protection from derivatives because unlike inflation-indexed bonds, a significant amount of capital isn't required and it's more flexible. Inflation derivatives require the buyer to provide a small premium to the swap provider.

In most cases the Consumer Price Index (CPI) is used measure the differences in annual inflation.


Investment dictionary. . 2012.

Игры ⚽ Нужно решить контрольную?

Look at other dictionaries:

  • Inflation derivatives — In finance, inflation derivatives (or inflation indexed derivatives) refer to over the counter and exchange traded derivatives that are used to transfer inflation risk from one counterparty to another. Typically, real rate swaps also come under… …   Wikipedia

  • Derivatives market — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

  • Inflation rate — In economics, the inflation rate is a measure of inflation, the rate of increase of a price index (for example, a consumer price index). The rate of decrease in the purchasing power of money is approximately equal. It s used to calculate the real …   Wikipedia

  • Inflation-indexed bond — Inflation indexed bonds (also known as inflation linked bonds or colloquially as linkers) are bonds where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment. [ Unfortunately, income taxes… …   Wikipedia

  • inflation — ► NOUN 1) the action of inflating or the condition of being inflated. 2) a general increase in prices and fall in the purchasing value of money. DERIVATIVES inflationary adjective inflationism noun inflationist noun & adjective …   English terms dictionary

  • inflation — noun 1》 the action of inflating or the condition of being inflated. 2》 Economics a general increase in prices and fall in the purchasing value of money. 3》 Astronomy (in some theories of cosmology) a very brief exponential expansion of the early… …   English new terms dictionary

  • inflation — n. 1 a the act or condition of inflating or being inflated. b an instance of this. 2 Econ. a a general increase in prices and fall in the purchasing value of money. b an increase in available currency regarded as causing this. Derivatives:… …   Useful english dictionary

  • Assets inflation — is an economic phenomenon denoting a rise in price of assets, as opposed to ordinary goods and services. Typical assets are financial instruments such as bonds, shares, and their derivatives, as well as real estate and other capital goods.… …   Wikipedia

  • Credit derivative — In finance, a credit derivative is a securitized derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset. In this way, the credit risk is on an entity other than the counterparties to the… …   Wikipedia

  • Corporate bond — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”