An inflation swap is the linear form of an inflation derivative, an over-the-counter and exchange-traded derivatives that is used to transfer inflation risk from one counterparty to another.
\nThere are three main types of inflation swap. In a standard interbank inflation-linked swap, or zero-coupon
\ninflation-linked swap, cash flow is exchanged on the maturity date. This swap pays out the exact value of
\nthe cumulative inflation for a fixed capital sum over a determined period. This is a good option for investors,
\nparticularly pension funds, seeking an investment mix aimed at compliance with long-term, inflation-related
\nobligations.<\/p>\n
Advantages<\/strong><\/span> Disadvantages<\/strong><\/span> An inflation swap is the linear form of an inflation derivative, an over-the-counter and exchange-traded derivatives that is used to transfer inflation risk from one counterparty to another. There are three main types of inflation swap. In a standard interbank inflation-linked swap, or zero-coupon inflation-linked swap, cash flow is exchanged on the maturity date. This […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[6918,6919,6920,918,917],"class_list":{"0":"post-2594","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-general","7":"tag-inflation-swap","8":"tag-inflation-swap-in-stocks","9":"tag-meaning-of-inflation-swap","10":"tag-stock-market","11":"tag-stocks","12":"entry"},"_links":{"self":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/2594","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/comments?post=2594"}],"version-history":[{"count":0,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/2594\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/media?parent=2594"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/categories?post=2594"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/tags?post=2594"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nPublic authorities, and companies dealing in utilities, real estate, and distribution all benefit from high inflation
\nas it brings bigger profits. Conversely, insurers, pension funds, and private investors fare better when
\ninflation is low, as otherwise they face a shrinking margin. Thus, there is a potential market for selling or
\nbuying inflation. The key advantage of entering into an inflation swap is being able to hedge against future
\nprice rises or diminishing margins. By selling inflation in an inflation-linked swap, future income linked to
\ninflation can be protected.<\/p>\n
\nThe main disadvantage of participating in an inflation swap is the risk that inflation rates may change
\ndrastically as a result of unexpected shifts in the global economy. Such changes can expose parties to loss
\nof profit or negative equity.<\/p>\n","protected":false},"excerpt":{"rendered":"