## Year-On-Year Inflation Swap

The

**is a financial contract where, at the end of each accrual period, one party - the inflation receiver - pays a fixed rate coupon**

*Year-on-Year Inflation Swap***and receives a floating payment**

*Fxd***linked to a specific inflation index from the other party - the inflation payer.**

*Flt*It corresponds to the Deriscope Type Inflation Swap with the setting Swap Type = Year On Year

Formally:

*Fxd = NrΔt*where

**is the swap notional,**

*N***is the length of the accrual period expressed in number of years and**

*Δt*

*Flt = N[m*YoY(Tend)+s]Δt*where

**represents the inflation rate at time**

*YoY(t) = I(t-lag)/I(t-1Year-lag) - 1***realized over the course of the preceding year with**

*t***being the end of the respective accrual period and**

*Tend***being a contractually specified time lag.**

*lag*The multiplier (also called gearing)

**and spread**

*m***are constants with typical values 1 and 0 respectively.**

*s*Note

**may not be the same in the above formulas if the fixed and floating legs have different daycount conventions.**

*Δt*Furthermore, for dates on which no directly applicable published inflation data exist, the referenced inflation index also depends on interpolation assumptions.