A year-on-year inflation-indexed swap (YYIIS) is a standard derivative product over inflation rate. The underlying is a single consumer price index (CPI). The first swap of this kind was traded through the inter-dealer broker network in November 1999.
It is called a swap because each year there is a swap of a fixed amount against a floating amount, although in practice only a one way payment is made (fixed amount – floating amount).
Detailed flows Each year, at time Party B pays Party A the fixed amount Party A pays Party B the floating amount where: K is the contract fixed rate N the contract nominal value M the number of years corresponding to the deal maturity i the number of years (0 < i <= M) is the fixed-leg year fractions for the interval [Ti−1, Ti] is the floating-leg year fractions for the interval [Ti−1, Ti] is the start date is the time of the flow i is the maturity date (end of the swap) is the inflation at start date (time ) is the inflation at time of the flow i (time ) is the inflation at maturity date (time )
See also Zero-Coupon Inflation-Indexed Swap (ZCIIS)
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