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Inflation swap indexation
Hello,I'm just wondering why inflation swaps have an indexation lag of 2 to 3 months? thanks.
Inflation swap indexation
Suppose I enter a 5year ZC inflation swap on 11 December 2015, with final payment 11 December 2020Can the payment be based on December inflation? No because December inflation won't be known until JanuaryCan it be based on November inflation? No because November inflation won't be published until 15 December 2015 at 8:30am (and presumably the same will occur in 2020)So the best we can do (to allow for trades in the 1st half of the month) is to use October 2020 vs 2015 CPI, i.e. inflation 2 months lagged.
Last edited by acastaldo on December 14th, 2015, 11:00 pm, edited 1 time in total.