Price Inflation Instruments
Inflation is an economic condition involving an increase in the general price level of goods and services over time. Inflation rate is defined as a percentage change in a reference index representing a basket of goods and services, such as the Consumer Price Index (CPI). Since inflation can significantly reduce the real value of an investment, many investors seek to hedge the inflation risk. Although there are several ways to protect against inflation, inflation derivatives such as inflation swaps provide some of the most effective hedges against inflation risk.
The object-based framework supports a workflow for creating instruments, models, and pricer objects to price financial instruments. Using these objects, you can price interest-rate, inflation, equity, commodity, FX, or credit derivative instruments. The object-based workflow is an alternative to pricing financial instruments using functions. Working with modular objects for instruments, models, and pricers, you can easily reuse these objects to compare instrument prices for different models and pricing engines. You can use the object-based workflow to price a single instrument or to price a collection of instruments in a portfolio. For more information on the workflow, see Get Started with Workflows Using Object-Based Framework for Pricing Financial Instruments.
Create Instrument and Pricer
Build Inflation Curve and Calculate Index Values
Compute Price and Cash Flow
Underlying Inflation Curve
Pricer for Inflation Instruments
Examples and How To
This example shows how to analyze inflation-indexed instruments using Financial Toolbox™ and Financial Instruments Toolbox™.
Use objects to model and price financial instruments.
Select instruments, associated models, and associated pricers.
The following table lists the interest-rate instrument objects with their associated
models and pricers and supported
Mapping functions to a workflow using objects for instruments, models, and pricers.