Chapter 6

Advanced Analytics for Index-Linked Bonds


This chapter provides an advanced overview to index-linked securities, including inflation-indexed securities such as TIPS issued by the U.S. government and index-linked gilts issued by the UK government. Basic concepts of bond purpose and design are described in summary, followed by a detailed look at inflation-linked bond yield analysis. This then enables us to look at the concept of the inflation term structure, including the break-even analysis.

The second half of the chapter illustrated the valuation of different I-L bonds. In addition, it shows an innovative pricing model to estimate the price of I-L bonds with the deflation floor using a binomial-tree model. Important concepts ...

Get Advanced Fixed Income Analysis, 2nd Edition now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.