Scribd Logo
Upload

Welcome to Scribd!

  • Term Structure of Expected Inflation: Cam Colella

    Uploaded by

    inferno10681
    4 views4 pages
    The document discusses improvements to models for estimating the term structure of expected inflation. It describes how the Cleveland Fed developed a new model that incorporates inflation swap rates, surveys of inflation expectations, and the break-even method using Treasury Inflation-Protected Securities (TIPS) versus regular Treasuries. This combined approach provides a better understanding of expected inflation over time, which is important for pricing bonds. Currently, the model estimates 10-year expected inflation at 1.65%.

    Original Description:

    Term Structure of Expected Inflation

    Original Title

    Presentation2-ExpectedInflation-Colella

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document discusses improvements to models for estimating the term structure of expected inflation. It describes how the Cleveland Fed developed a new model that incorporates inflation swap rates, surveys of inflation expectations, and the break-even method using Treasury Inflation-Protected Securities (TIPS) versus regular Treasuries. This combined approach provides a better understanding of expected inflation over time, which is important for pricing bonds. Currently, the model estimates 10-year expected inflation at 1.65%.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    4 views4 pages

    Term Structure of Expected Inflation: Cam Colella

    Uploaded by

    inferno10681
    The document discusses improvements to models for estimating the term structure of expected inflation. It describes how the Cleveland Fed developed a new model that incorporates inflation swap rates, surveys of inflation expectations, and the break-even method using Treasury Inflation-Protected Securities (TIPS) versus regular Treasuries. This combined approach provides a better understanding of expected inflation over time, which is important for pricing bonds. Currently, the model estimates 10-year expected inflation at 1.65%.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 4

    Term Structure of

    Expected Inflation
    Cam Colella

    Old Term Structure Models

    aka Yield Curve


    Generally Treasuries
    Improves on surveys
    Break even method
    IPS v. Bonds

    Cleveland Fed improved


    methodology
    New model
    Incorporates inflation swaps, surveys,
    AND Tres.

    Inflation Swaps
    OTC derivaties
    Basically, bet on inflation

    Buyer pays nominal amount, seller pays


    inflation-based payment
    Drives our understanding of expected
    inflation, which is critical to pricing bonds
    Combines this with survey-based expectation
    and IPS v. Treasury break-even analysis

    Moving Forward
    Current estimate
    is 1.65% (10 yr)
    Separate
    nominal/real
    term structures
    Investigate
    mispricing of
    TIPS post-2008

    You might also like