FAQ — Inflation Derivatives

What types of inflation derivatives are covered in GIAnalyzer?

Zero coupon inflation swap and real rate inflation swap are covered in this module.

Is the seasonality incorporated in the calculations?

Yes, it is one of the parameters in all calculations related to inflation derivatives.

What is seasonality and when is it used?

Seasonality expresses by how much the inflation in a specific month differs from average monthly inflation across the year. It is used in interpolation calculations. For example, if the expected inflation for 1 year is 1% and 2% for two years, the expected inflation for 1.5 years without seasonality will be 1.5%, but using seasonality might lead to different result, according to the seasonality in the first six months.

Should the currencies in the inflation leg and in the nominal leg of real rate inflation swap be the same?

No, the currency in the nominal leg can be different from the currency in the inflation leg.