Valuing CPI Bond at real yield curve
Posted by
igitur on
Jun 03, 2014; 1:04pm
URL: http://quantlib.414.s1.nabble.com/Valuing-CPI-Bond-at-real-yield-curve-tp15354.html
Hi,
I want to value a CPI Bond using a real, not nominal, yield curve. As I understand it, the current CPI Bond methodology requires some CPI indices, a zero inflation curve and a nominal yield curve. I don't have all those available, but I should be able to input a real curve instead of nominal curve (used in discounting) and a flat zero inflation curve consisting of rates = 0.
It should give the same value. Conceptually, this method is also the same as valuing a fixed rate bond, but with an added inflation ratio adjustment, based on the CPI indices.
But I'm struggling to create a zero inflation curve which is basically flat and all 0s. I've tried using PiecewiseZeroInflationCurve and with some instruments yielding 0s, but I end up with a curve that is not exactly flat or zero. I suspect it's a consequence of the historic CPI indices and the fact that they're interpolated.
Are there any other ways, besides PiecewiseZeroInflationCurve to construct a ZeroInflationCurve?
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