View source for Year-on-year inflation-indexed swap

{{unreferenced|date=December 2014}}
{{Financial markets}}
A '''year-on-year inflation-indexed swap''' ('''YYIIS''') is a standard [[Inflation derivative|derivative product]] over [[inflation rate]]. The [[Index_(economics)|underlying]] is a single [[consumer price index]] (CPI).

It is called a [[Swap (finance)|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 <math>T_i</math>
** Party B pays Party A the fixed amount <math>N{\phi_i}K</math>
** Party A pays Party B the floating amount <math>N{\psi_i}[\frac{I(T_i)}{I(T_{i-1})} - 1]</math>
where:
* '''K''' is the contract fixed rate
* '''N''' the contract nominal value
* '''M''' the number of years corresponding to the deal maturity
* '''i''' the number of years (0 < i <= M)
* '''<math>\phi_i</math>''' is the fixed-leg year fractions for the interval [Ti−1, Ti]
* '''<math>\psi_i</math>''' is the floating-leg year fractions for the interval [Ti−1, Ti]
* '''<math>T_0</math>''' is the start date
* '''<math>T_i</math>''' is the time of the flow i
* '''<math>T_M</math>''' is the maturity date (end of the swap)
* '''<math>I(T_0)</math>''' is the inflation at start date (time <math>T_0</math>)
* '''<math>I(T_i)</math>''' is the inflation at time of the flow i (time <math>T_i</math>)
* '''<math>I(T_M)</math>''' is the inflation at maturity date (time <math>T_M</math>)

== See also ==
* [[Zero-Coupon Inflation-Indexed Swap]] ([[ZCIIS]])

==References==
{{reflist}}

{{Derivatives market}}

[[Category:Inflation]]
[[Category:Derivatives (finance)]]
[[Category:Swaps (finance)]]