Inflation-Sensitive Assets
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Term Structure of Interest Rates and Expected Inflation
Olesya V Grishchenko and Jing-Zhi Huang
Foreword
Inflation-Sensitive Assets
Investable Commodity Indexes and Inflation: A Brief History
Commodities, Inflation and Growth: Implications for Policy and Investments
Inflation and Real Estate Investments
Infrastructure Assets and Inflation
Equity Investments and Inflation
Inflation-Linked Markets
Understanding and Trading Inflation Swaps and Options
The Role of Models in Modern Monetary Policy
Term Structure of Interest Rates and Expected Inflation
Monetary Policy, Inflation and Commodity Prices
Inflation and Asset Prices
Inflation and Equity Returns
Inflation Hedging through Asset and Sector Rotation
Practical Models for Inflation Forecasting
Protecting Insurance Portfolios from Inflation
Inflation, Pensions and Liability-Driven Investment Solutions
Ultra-High-Net-Worth Investors and the Real Asset Value Chain
Inflation Markets: A Portfolio Manager’s Perspective
Inflation Indexation and Products in Emerging Markets
In this chapter we report some developments in the modelling of the term structure of interest rates and expected inflation. We first review nominal term structure models and then we discuss models of real term structures and expected inflation, and illustrate how inflation expectations and risk premiums can be derived. Finally, we discuss the implications of this research for investors and monetary policymakers.
TERM STRUCTURE MODELLING: BASIC CONCEPTS
One of the most important aims in financial economics is to understand how expected bond returns move over time. For this purpose, a successful modelling of both short- and long-term bond yields (ie, the term structure) is called for. The literature on the term structure of nominal interest rates is vast, and the topic has developed into a separate field of financial economics since the 1990s. For the sake of brevity, we shall highlight only the key concepts and a few of the many influential papers that have shaped the evolution of the term structure modelling over time. Some of the mathematical derivations are provided in the appendixes.
From the short rate to the yield curve
A crucial idea underlining most of the term
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