Inflation Bond
Inflation Bond is a direct subtype of Bond
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TYPE INCLUSION RELATIONSHIPS
AVAILABLE FUNCTIONS
AVAILABLE CREATE FUNCTION KEYS
TYPICAL OBJECTS OF TYPE Inflation Bond
This type represents a specialization where each coupon is linked to a defined Inflation Index.
The restriction applies that the Inflation Index must have Quote Type = Relative
The coupon amounts paid at future times are not known today since they depend on the inflation index ascribed at those future times.
They are also referred to as nominal coupons and they can be seen as stemming from known fictitious amounts referred to as real coupons being implied by a fictitious fixed rate bond to which the inflation bond is linked.
The nominal coupons are thus Inflation Adjusted Cash Flows, where the unadjusted cash flows are the real coupons.
A similar distinction between real and nominal applies on the principal amount paid at maturity.
The nominal principal amount being redeemed at maturity will be an Inflation Adjusted Cash Flow, where the unadjusted cash flow is the real principal amount that equals the bond's notional defined at issuance date.
Note that the current implementation does not allow for a floor provision, whereby the nominal principal amount can never fall below the real principal amount.
If there is only one accrual period in the defined Accrual Schedule, then it represents a zero bond returning an inflated notional, such as the inflation leg in a Zero Inflation Swap.
Look up the information in the key above for details on how to set up such a date schedule.