Yield duration in Chapter 6 is defined as the sensitivity of the fixed-income bond price to a change in the nominal yield to maturity. Inflation-indexed bonds require that we focus on *why* the nominal rate changes and distinguish between a change in the real rate and a change in the inflation rate. Let's start by formalizing the stylized linkers, keeping close to the notation of Chapter 3. Let the nominal rate be *y*, the real rate *r*, and the inflation rate *i*. Also, let the number of periods to maturity be *N*, the fixed coupon rate *c*, the par (or face) value of the linker *FV*, and the current price *PV*. For these stylized linkers, we are on a coupon payment date so there is no accrued interest to sully the equations.

P-Linker valuation ...

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