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The Year-on-Year Inflation-Indexed Swap (YYIIS) is a standard derivative product over Inflation rate. The underlying is a single Consumer price index (CPI).

It is called Swap because each year there is a swap of a fixed amount against a floating amount. But in reality only a one way payment is made (fixed amount - floating amount).

Detailed flows

• Each year, at time ${\displaystyle T_{i))$
  • Party B pays Party A the fixed amount ${\displaystyle N{\phi _{i))K}$
  • Party A pays Party B the floating amount ${\displaystyle N{\psi _{i))[{\frac {I(T_{i})}{I(T_{i-1})))-1]}$

where:

• K is the contract fixed rate
• N the contract nominal value
• M the number of years corresponding to the deal maturity
• i the number of years (0 < i <= M)
• ${\displaystyle \phi _{i))$ is the fixed-leg year fractions for the interval [Ti−1, Ti]
• ${\displaystyle \psi _{i))$ is the floating-leg year fractions for the interval [Ti−1, Ti]
• ${\displaystyle T_{0))$ is the start date
• ${\displaystyle T_{i))$ is the time of the flow i
• ${\displaystyle T_{M))$ is the maturity date (end of the swap)
• ${\displaystyle I(T_{0})}$ is the inflation at start date (time ${\displaystyle T_{0))$)
• ${\displaystyle I(T_{i})}$ is the inflation at time of the flow i (time ${\displaystyle T_{i))$)
• ${\displaystyle I(T_{M})}$ is the inflation at maturity date (time ${\displaystyle T_{M))$)