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Inflation CPI Swap (float/CPI)

Trade Type: Swap
Trade Components: Leg Data with Leg Types Floating and CPI
Schedule Data

A CPI swap is an inflation swap where one of the legs has a floating rate with coupon payments linked to a supported inflation index.

Coupons on the inflation leg are calculated starting by the contractual real coupon rate and adjusting it to a nominal rate using the change from the relevant inflation index fixing before issue date to the index fixing at coupon reset date, taking into account observation lag, and if necessary, interpolation between inflation index fixings.

If there is a final exchange of notional, the amount to be disbursed on the maturity date of the inflation leg (excluding the last coupon) is calculated by multiplying the initial notional (face value) value by the increase in the relevant inflation index over the life of the swap.

This example is a CPI swap with a non-inflation floating 6M GBP Libor pay leg vs an annual receive leg linked to the UK Retail Price Index (UK RPI), with a 2 months observation lag, a base UK RPI at 210, and a real interest rate of 2%.

Year-on-Year Inflation Indexed Swap (fixed/YoY)

Trade Type: Swap
Trade Components: Leg Data with Leg Types Fixed and YY
Schedule Data

A YoYIIS is a swap contract where one leg has annual inflation linked coupon payments that are exchanged for fixed payments on the other leg. A Year-on-Year inflation leg differs from a CPI leg in that the inflation index values reference the previous year and not the value at the start of the swap, and that no fixed real rate is used.

This example is a YoYIIS with a non-inflation fixed EUR pay leg vs a YoY receive leg linked to the EU Harmonised Indices of Consumer Prices (EU HICP), with a 2 months observation lag.