Pricing inflation-indexed derivatives

Fabio Mercurio

Quantitative Finance, 2005, vol. 5, issue 3, 289-302

Abstract: In this article, we start by briefly reviewing the approach proposed by Jarrow and Yildirim for modelling inflation and nominal rates in a consistent way. Their methodology is applied to the pricing of general inflation-indexed swaps and options. We then introduce two different market model approaches to price inflation swaps, caps and floors. Analytical formulae are explicitly derived. Finally, an example of calibration to swap market data is considered.

Keywords: Inflation; Nominal rates; Inflation-indexed derivatives; Pricing inflation-indexed derivatives (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (16)

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DOI: 10.1080/14697680500148851

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