5.3.2 Inflation Revenue Swap
This topic explains the Inflation revenue swap contract booking that can be enabled through the Derivative Contract Input screen.
Given a set of dates T_1, . . . , T_M, In an Inflation Revenue Swap, at each time T_i, assuming T_i = N years, the fixed rate payer pays the fixed rate receiver the fixed amount
N * [ ( 1 + K ) ^ N - 1 ]
where K and N are, respectively, the contract fixed rate and nominal value.
In exchange for this fixed payment, the fixed rate receiver pays the fixed rate payer, at each time T_i, the floating amount
N * [ P(T_i) / P_0 - 1 ]
where P_0 and P(T_i) are, respectively, the initial price index and the price index at time T_i.
- Daily
- Weekly
- Monthly
- Quarterly
- Half yearly
- Yearly
Below is the example for Interest Rate Swaps:
Table 5-38 Inflation Index
| US-Non-revised Consumer Price Index (CPURNSA) - USD | US-Non-revised Consumer Price Index (CPURNSA) - USD |
|---|---|
|
2015 MAR |
236.119 |
|
2015 APR |
236.599 |
|
2015 MAY |
237.805 |
|
2016 MAR |
238.132 |
|
2016 APR |
239.261 |
|
2016 MAY |
240.236 |
|
2017 MAR |
243.801 |
|
2017 APR |
244.524 |
|
2017 MAY |
244.733 |
|
2018 MAR |
249.554 |
|
2018 APR |
250.546 |
|
2018 MAY |
251.588 |
|
2019 MAR |
254.202 |
|
2019 APR |
255.548 |
|
2019 MAY |
256.092 |
|
2020 MAR |
258.115 |
|
2020 APR |
256.389 |
|
2020 MAY |
256.394 |
Table 5-39 Inflation swap contract details
| Deal Details | Values |
|---|---|
|
Buy or Sell |
Sell |
|
Trade Date |
15-May-15 |
|
Tenor (T) |
4 Years |
|
Value Date |
18-May-15 |
|
Maturity Date |
18-May-20 |
|
Notional Amount |
100,000 |
Table 5-40 Inflation Swap Deal Details
| Deal details | Values | Values |
|---|---|---|
|
NA |
In Leg (Receive) |
Out Leg (Pay) |
|
Currency |
USD |
USD |
|
Notional Amount (P) |
100,000 |
100,000 |
|
Rate Type |
Fixed |
Indexed |
|
Rate |
1.73% |
- |
|
Rate Code |
- |
CPURNSA |
|
Tenor Code |
- |
1M |
|
Interpolation Method |
- |
Linear |
|
Interest Computation |
Compound |
Simple |
|
Compounding Frequency (n) |
Yearly |
- |
Table 5-41 Inflation Swap for In-Leg
| Deal Details | Values |
|---|---|
|
Period Start (TS) |
18-May-15 |
|
Period End (TE) |
18-May-16 |
|
No. of Days (D) = TE-TS |
366 |
|
Receive Principal (P) |
100,000 |
|
Index Value (IT) |
1.73% |
|
Receive Interest (RI) |
1,734.78 |
Table 5-42 Inflation Swap for Out-Leg
| Deal Details | Values |
|---|---|
|
Period Start (TS) |
18-May-15 |
|
Period End (TE) |
18-May-16 |
|
No. of Days (D) = TE-TS |
366 |
|
Pay Principal (P) |
100,000 |
|
Index Value (IT) |
238.772 |
|
Pay Interest (PI) |
1,007.13 |
|
Net Cashflow (RI-PI) |
727.65 |
Parent topic: Inflation Swap Processing