Deriscope

## The Excel Derivatives Periscope

Zero_Inflation_Swap

The Zero Inflation Swap is a financial contract where one party - the inflation receiver - pays a single fixed rate coupon Fxd at maturity T and receives a single floating payment Flt linked to a specific inflation index from the other party - the inflation payer.
It corresponds to the
Deriscope Type Inflation Swap with the setting Key Inflation Swap::Swap Type = Zero Coupon
Formally, assuming the maturity T can be expressed as L(T-T₀) number of years from the swap inception T₀, then:
Fxd = N[(1+r/f)ᴸ⁽ᵀ⁻ᵀᵒ⁾ᶠ - 1]
where N is the swap notional, f is the recompounding frequency of the fixed rate r and
Flt = N[I(T-lag)/I(T₀-lag) - 1]
where I(t) is the value of the referenced raw inflation index that applies at time t, but generally published after t with some index-specific publication delay Δt
lag is a contractually specified time lag that must not be less than Δt
Note the QuantLib implementation assumes f = 1
Furthermore, for dates on which no directly applicable published inflation data exist, the referenced inflation index also depends on interpolation assumptions.