Pricing inflation indexed swaps using an extended hjm framework with jump process

Karahan, Ceren
Inflation indexed instruments are designed to help protect investors against the changes in the general level of prices. So, they are frequently preferred by investors and they have become increasingly developing part of the market. In this study, firstly, the HJM model and foreign currency analogy used to price of inflation indexed instruments are investigated. Then, the HJM model is extended with finite number of Poisson process. Finally, under the extended HJM model, a pricing derivation of inflation indexed swaps, which are the most liquid ones among inflation indexed instruments in the market, is given.


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Inflation-indexed instruments provide a real return and protect investors from the erosion of the purchasing power of money. Hence, inflation-indexed markets grow very fast day by day. In this thesis, we focus on pricing of the inflation-indexed swaps and swaptions which are the most liquid derivative products traded in the inflation-indexed markets. Firstly, we review the Hull-White extended Vasicek model in the HJM framework. Then, we use this model to price inflation-indexed swaps. Also, pricing of infla...
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The existing new Keynesian open economy literature tends to make a simplifying assumption that there is no trend inflation. The dissertation is composed of two essays which incorporate positive trend inflation into Open Economy New-Keynesian Models. In the first essay, a standard small open economy model is reformulated to account for positive trend inflation. Then, the model is used to understand the effects of macroeconomic shocks in a small open economy when trend inflation is positive. The main finding ...
Citation Formats
C. Karahan, “Pricing inflation indexed swaps using an extended hjm framework with jump process,” M.S. - Master of Science, Middle East Technical University, 2010.