What Are Inflation-indexed Securities and Derivatives?
1.1 A historical perspective. 1.2 How indexed bonds work. 1.3 The role of derivatives. 2 Security Design. 2.1 Choice of price index. 2.1.1 Index matching. 2.1.2 Index reliability and integrity. 2.1.3 Other practical considerations. 2.2 Cash flow structure. 2.2.1 Capital Indexed Bond (CIB). 2.2.2 Interest Indexed Bond (IIB). 2.2.3 Current Pay Bond (CPB). 2.2.4 Indexed Annuity Bond (IAB). 2.2.5 Indexed Zero-Coupon Bond (IZCB). 2.2.6 Other types of indexed bonds. 2.2.7 Cash flows of the different structures. 2.2.8 Factors that influence the choice of security design. 2.3 Application of the index to the cash flows. 2.3.1 The problem of the indexation lag. 2.3.2 Why indexation lags are necessary. 2.3.3 How to minimise the indexation lag. 2.3.4 Full or partial indexation? 2.4 The impact of tax regulations. 2.4.1 Uncertainty of post-tax real yields. 2.4.2 The effect of income accrual rules. 2.5 Options on indexed bonds. 2.5.1 Callable bonds. 2.5.2 Puttable bonds. 2.5.3 Convertible bonds. 2.6
