Deflation Floors: Getting at Least Par Back
This lesson is part of the course
In this lesson
You compute the index ratio and adjusted principal at maturity in four price scenarios, apply the deflation floor to the redemption, measure what the floor is worth and see that the final coupon is not protected.
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Lessons in this course
- Price Indices and Lags: The Reference Index for Any Date Locked
- Index Ratio and Adjusted Principal: How the Principal Grows Locked
- Coupons: Real Coupon × Adjusted Principal Locked
- Real Yield and Price: Discounting Real Cash Flows Locked
- Breakeven Inflation: Nominal vs Inflation-Linked Locked
- Deflation Floors: Getting at Least Par Back Locked
- Inflation Scenarios: Linker vs Nominal Bond Returns Locked
- Portfolio View: Real vs Nominal Income and Inflation Sensitivity Locked