The Excel Derivatives Periscope



The Zero Inflation Swap is a financial contract where one party - the inflation receiver - pays a single fixed rate coupon Fxd at maturity T and receives a single floating payment Flt linked to a specific inflation index from the other party - the inflation payer.
Formally, assuming the maturity T can be expressed as M number of years from swap inception, then:
Fxd = N[(1+r/f)^(Mf) - 1]
where N is the swap notional, f is the recompounding frequency of the fixed rate r and
Flt = N[I(T-lag)/I(T0-lag) - 1]
where I(t) is the value of the referenced inflation index at time t with T0 being the date of the swap inception and lag being a contractually specified time lag.
Note the QuantLib implementation assumes f = 1
Furthermore, for dates on which no directly applicable published inflation data exist, the referenced inflation index also depends on interpolation assumptions.