Year-on-year inflation-indexed swap

Overview

A year-on-year inflation-indexed swap (YYIIS) is a standard derivative product over inflation rate. The underlying is a single consumer price index (CPI). The first swap of this kind was traded through the inter-dealer broker network in November 1999. It is called a swap because each year there is a swap of a fixed amount against a floating amount, although in practice only a one way payment is made (fixed amount – floating amount).

Detailed flows

Each year, at time

T

i

{\displaystyle T_{i}}

Party B pays Party A the fixed amount

N

ϕ

i

K

{\displaystyle N{\phi _{i}}K}

Party A pays Party B the floating amount

N

ψ

i

[

I (

T

i

)

I (

See also

Zero-Coupon Inflation-Indexed Swap (ZCIIS)