CPI fixing swap

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Risk management - inflation risk - Consumer Price Index (CPI) - derivative instruments - swaps - inflation swap.

A CPI fixing swap is an agreement between two parties to exchange:

(1) a series of payments referenced to the Consumer Price (or Prices) Index; for
(2) a fixed rate of interest.

CPI fixing swaps are used to manage CPI inflation risk.

Like other capital market swaps, they are settled net, and subject to risks including their relative technical complexity, collateral calls, volatile market prices, and reporting requirements.

Their current market prices also indicate the swap market's current average expectations about future rates of CPI inflation.

This is a dimension of expectations theory.

See also