| This article studies the valuation of inflation-indexed securities. Different from Jarrow and Yildirim [2003], a new solution is proposed to perform market data calibration by replacing real bonds with nominal bonds and inflation-indexed swaps. Taking the inflation-indexed caps for example, an explicit form of inflation-indexed caps under the HJM model with stochastic volatility is first proposed.Next. a four-factor arbitrage-free term structure model is fit to the quoted inflation-indexed swap rates, the nominal bond yields, and the HICP ex-tobacco data.The main contents of this paper can be summarized as follows:Chapter â… :The introduction.Chapter â… :We introduce the economy.Chapter â…¡ presents the explicit form solutions of inflation-indexed caps/floors prices.Chapter IV obtain the prices of indexed caps with different maturities. |
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