Strategy #0000000053 · Inflation-linked assets and macro hedging
Inflation swaps and purchasing-power hedging
Compare CPI index growth with the fixed leg; distinguish inflation compensation from real return.
In a zero-coupon inflation swap, the realised-CPI receiver and fixed-rate payer settle the cumulative index change at maturity. TIPS adjust principal with CPI, but their market prices also depend on real yields. Property and commodities do not track consumer prices one-for-one. A hedge must match the liability index, horizon and inflation sensitivity.
A hedge can mismatch the index or tenor; real rates, basis, CPI lag and asset prices still move.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
How does a zero-coupon swap scenario change when cumulative CPI is above or below the fixed inflation rate?
Rose has a nominal liability that rises with CPI. Jack enters start/end index levels, a fixed inflation rate and hedge notional.
The tool calculates cumulative CPI and the compounded fixed leg, then shows their difference. It uses entered CPI rather than forecasting inflation or discounting cash flows.
If expenses follow another region or basket, the swap has index basis. TIPS prices also respond to real yields; hedging headline inflation does not fully protect purchasing power.
- Starting CPI index assumptionEnter CPI start/end, fixed rate, tenor, notional and costs for simplified zero-coupon swap settlement.
- Ending CPI index assumptionNo CPI interpolation/publication lag, discount curve, collateral or live quotes; not a TIPS total-return model.
- CPI leg less 2.5% fixed leg per 10,000 notionalIllustrative expiry outcome.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
Payoff=N\left[\frac{I_T}{I_0}-(1+K)^T\right],\quad Inflation_{realised}=\frac{I_T}{I_0}-1
N is notional; I0/IT are start/end index levels, K is fixed annual inflation and T years. Contract settlement may include index lags, interpolation and discounting.
Greeks: the directional intuition
- 指數基差
- Measures sensitivity to implied volatility.
- 實質利率
- Measures sensitivity to implied volatility.
- 期限及對手方
- Measures sensitivity to implied volatility.
Payoff=N\left[\frac{I_T}{I_0}-(1+K)^T\right],\quad Inflation_{realised}=\frac{I_T}{I_0}-1
Practical context · published observations
Inflation swaps and purchasing-power hedging: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
沒有 CPI 插值／發布 lag、折現曲線、抵押品或即時市場報價；不代表 TIPS 全回報。 Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related strategies can have different exposures and failure modes.
Compare the mechanism and its limits.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Zero-coupon CPI swap | Index settlement | Exchanges fixed cumulative inflation for CPI. | Basis and counterparty risk. |
| TIPS | Indexed principal | Principal and coupon base adjust with CPI. | Real-rate duration and inflation-index mismatch. |
| Property / commodity allocation | Real-asset exposure | Uses rents, land or commodity supply-demand as inflation proxies. | Prices do not reliably track CPI. |
No CPI interpolation/publication lag, discount curve, collateral or live quotes; not a TIPS total-return model.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.