We examine the inflation-hedging properties of various financial assets and portfolios by estimating simple time-series models of the joint dynamics of each asset-inflation pair, for multiple inflation indices and at horizons from one month to 30 years. There is no one-size-fits-all approach to...

This paper uses UK time-series data to document that the ratio of inflation-linked debt to total public debt (“linker share”) is procyclical. The business cycle properties of the linker share indicate a positive relationship with inflation, even after controlling for breakeven inflation....

Bonds are debt securities issued by debtors to creditors. In short, bonds are debt securities that can be purchased and the buyer will benefit in the form of interest later. The bonds contain the due date for payment of debt and interest. The interest on a bond is called a coupon. Coupons must...

Obligations are debt securities from the private sector or the government to the public, both domestic and international, with an imbalance of coupons or discounts and principal repayments of more than one year. Coupons are fixed rate or floating rate or a combination of fixed rate and floating rate

This study examines the performance of corporate sustainable bonds. Unlike traditional bonds, the proceeds of sustainable bonds are utilized for financing projects to bring about environmental and socio-economic benefits. First, we analyse the market reaction to traditional and sustainable bond...

Households participating in financial markets pay attention to inflation news when making their investment decisions, even in an environment of mostly low and stable inflation. ETFs and open-ended mutual funds holding Treasury Inflation-Protected Securities (TIPS) receive inflows from retail...

I investigate the introduction of GDP-indexed bonds as an additional source of government borrowing in a quantitative default model. The idea of linking debt payments to developments in GDP resurfaced with the 1980s debt crisis and peaked with the COVID-19 outbreak. I show that the gains from...

Households participating in financial markets pay attention to inflation news when making their investment decisions, even in an environment of mostly low and stable inflation. ETFs and open-ended mutual funds holding Treasury Inflation-Protected Securities (TIPS) receive inflows from retail...

UK time-series data are used to document that the ratio of inflation-linked debt to total public debt (“linker share”) is procyclical. The business cycle properties of the linker share indicate a positive relationship with inflation, even after controlling for breakeven inflation. This can...

We investigate the capital-protection property of inflation-linked bonds in an international context over the period 2012 to 2022. Inflation-linked bonds compensate domestic investors for loss of local purchasing power. Whether the bonds protect foreign investors effectively depends on the...

The world's first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds were invented to deal with severe wartime inflation and with angry discontent among soldiers in the U.S. Army with the decline in purchasing power of...

A tax-smoothing objective is used to assess the optimal consumption of public debt with respect to maturity and contingencies. This objective motivates the government to make its debt payout contingent on the levels of public outlay and the tax base. If these contingencies are present, but asset...

The Long Finance and London Accord community (over 48 financial institutions, thousands of people in finance and some 250 reports since 2005) has developed a simple, almost subversive, proposal for on climate change finance – index-linked carbon bonds. An indexlinked carbon bond is a...

We show that GDP-linked bonds can provide diversification benefits to investors. We use a stochastic spanning methodology which makes no assumptions on the distri- butional characteristics of the returns of these novel instruments and test both floaters and linkers. None of these types of...

Although inflation-linked bonds have many advantages, nominal bonds are the most important instrument to finance public debts throughout the world. One explanation that the literature has offered is that nominal bonds make countercyclical monetary policies more effective. This paper reconsiders...

This paper provides a toolkit for extracting accurate information about inflation expectations using inflation-linked bonds. First, we show how to estimate term structures of zero-coupon real rates and break-even inflation rates (BEIRs) in the euro area. This improves the analysis of...

Inflation-linked bond markets have experienced significant growth in recent years. This growth is somewhat surprising, for inflation-linked bonds cannot be considered a financial innovation and their development has taken place in a period of historically low global inflation and inflation...

We explore four issues concerning annuitization options that retirees might use in the decumulation phase of an individual accounts' retirement saving system. First, we investigate the operation of both real and nominal annuity individual annuity markets in the United Kingdom. The widespread...

We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state variables. The nominal pricing kernel is constructed in a...

We show that GDP-linked bonds can provide diversification benefits to investors. We use a stochastic spanning methodology which makes no assumptions on the distributional characteristics of the returns of these innovative instruments and apply to test both floaters and linkers. We find that both...

Households participating in financial markets pay attention to inflation news when making their investment decisions, even in an environment of mostly low and stable inflation. ETFs and open-ended mutual funds holding Treasury Inflation-Protected Securities (TIPS) receive inflows from retail...

This chapter provides an introduction to index-linked securities, including inflation-indexed securities such as TIPS issued by the U.S. government and index-linked gilts issued by the UK government. Basic concepts of bond purpose and design are described in summary, followed by a detailed look...

Compared with stocks, bonds are more directly affected by fluctuations in oil prices through the expected inflation component in nominal bond yields. Surprisingly, prior literature finds little predictive power of oil price changes on bond excess returns. This finding is counter intuitive,...

We derive the price of inflation-indexed bonds of which the payments are linked to a lagged price index, and solve for the optimal bond portfolio under both inflation and indexation lags in closed form. We show that indexation lags increase the number of state variables characterizing both the...