Stably finite ring

Template:Financial markets The Zero-Coupon Inflation-Indexed Swap (ZCIIS) is a standard derivative product over Inflation rate. The underlying asset is a single Consumer price index (CPI).

It is called Zero-Coupon because there is only one financial flow, at the end, without any intermediate coupon.

It is called Swap because at the maturity date there is a swap of a fixed amount against a floating amount. But in reality only a one way payment is made (fixed amount - floating amount).

Detailed flows

• At time $T_M$ = M years
  • Party B pays Party A the fixed amount $N[(1+K{)}^M-1]$
  • Party A pays Party B the floating amount $N[\frac{I(T_M)}{I(T_0)}-1]$

where:

• K is the contract fixed rate
• N the contract nominal value
• M the number of years
• $T_0$ is the start date
• $T_M$ is the maturity date (end of the swap)
• $I(T_0)$ is the inflation at start date (time $T_0$)
• $I(T_M)$ is the inflation at maturity date (time $T_M$)

See also

• Year-on-Year Inflation-Indexed Swap (YYIIS)