Inflation-Linked Products

<body stylesrc="../_private/template_title.htm" topmargin="10" leftmargin="10" bgcolor="#FFFFFF" link="#333366" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table3"> <tr> <td width="780" align="center"> <div align="center"> <table border="0" cellpadding="5" cellspacing="0" height="206" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table4"> <tr> <td align="right" height="198" width="1%"> <p align="left"> <img border="0" src="../images/book_benaben_brice_(2006).gif" width="135" height="200"></td> <td valign="top" align="left" height="198"> <table border="0" cellspacing="1" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0" id="table5"> <tr> <td colspan="3" width="0%"> <p class="book_title">Inflation-Linked Products</td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"><img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> <td width="52%" class="book_details_tags" valign="top" height="144" align="left" rowspan="9"> <map name="FPMap6"> <area href="../main/ratings.htm" shape="rect" coords="73, 0, 165, 33"> </map> <img border="0" src="../images_title/benabe2.gif" usemap="#FPMap6" width="218" height="158"></td> <td class="book_details" height="112" align="center" width="25%" rowspan="7"> <map name="FPMap5"> <area target="_top" href="http://www.riskbook.com/link_topic/best_of_2006.htm" shape="rect" coords="0, 0, 124, 108"> </map> <img border="0" src="../images/best_of_award_2006.gif" width="125" height="109" usemap="#FPMap5"></td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" height="32" align="center" width="25%" rowspan="2"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> </table> </td> </tr> </table> </div> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="468" id="table6"> <tr> <td> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table7"> <tr> <td width="50%" valign="top"> <p align="left" class="body"><strong style="font-weight: 400">The inflation market is dominated by sovereign debt issuers. The largest is the US Treasury, but there is also a vibrant market in the UK and Europe. Even Japan, which has experienced deflation for the past few years, is in on the act. Corporate issuers have also emerged, and there is a fledgling derivatives market. </strong></p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="125" align="left" id="table8"> <tr> <td width="120"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td><td width="5"> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">This edited collection offers twelve papers, each taking an in-depth look at different aspects of the market. This isn't a book for beginners. If you already have some experience with "linkers"—or you have read one of the introductory texts out there—this book will take you to the next level of sophistication. </strong></p> <p align="left" class="body"><strong style="font-weight: 400">After a brief introduction, the first chapter looks at valuation issues, discussing nominal interest rates, real interest rates, break-even inflation, the Fisher equation, inflation beta, carry, and much more. </strong></p> <p align="left" class="body"><strong style="font-weight: 400">The next chapter offers an interesting argument that a global inflation-linked portfolio (with currency hedging) offers a better hedge against domestic inflation than does a purely domestic inflation-linked portfolio. Essentially, you diversify away real interest rate risk while taking advantage of strong correlations between different nations' inflation rates.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">A chapter looks at the Japanese inflation market, which is active but quiet unique doe to the recent deflation.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">The next chapter looks at the historical development of the inflation market. After that is a chapter on inflation derivatives and then a chapter on inflation financial engineering.</strong></p> </td> <td width="50%" valign="top" class="body" rowspan="2"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table9"> <tr> <td width="100%" bgcolor="#333366"> <p class="header_yellow" align="center">Contents</td> </tr> <tr> <td width="100%" class="explanatory_text"> <table border="1" cellpadding="0" cellspacing="5" style="border-collapse: collapse" bordercolor="#CCCCFF" bgcolor="#CCCCFF" width="100%" id="table10"> <tr> <td class="contents_expanded"> <p class="contents">Introduction</p> <p class="contents"><b>SECTION 1: Understanding and Investing in Inflation-Linked Products </b></p> <p class="contents">1. An Asset Manager’s Approach to Real Yield Management </p> <p class="contents">2. The Benefits of Global Inflation-Indexed Bonds</p> <p class="contents">3. Inflation Flows and Investment Strategies</p> <p class="contents">4. Special Aspects of Japanese Inflation-Linked Bonds</p> <p class="contents">5. Inflation-Linked Derivatives: From Theory to Practice</p> <p class="contents">6. Modeling Inflation in Finance</p> <p class="contents"><b>SECTION 2: Asset and Liability Management with Inflation-Linked Products </b></p> <p class="contents">7. Agence France Trésor’s (AFT’s) Approach to Inflation-linked Bonds</p> <p class="contents">8. Active Liability Management with Inflation Products</p> <p class="contents">9. The Active Alpha Framework and Inflation-Protected Securities</p> <p class="contents">10. Quantifying and Hedging Inflation Risk for Pension Funds</p> <p class="contents">11. From Conditional to Full Indexation: A Discussion of Liability Solutions used in the Dutch and UK Pension Funds</p> <p class="contents">12. Asset-Liability Management of Inflation Risk for Insurers</td> </tr> </table> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">All these opening chapters are excellent, going beyond the basics and presenting sophisticated, in-depth information practitioners and academics will value.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">The balance of the book—about the last third—comprises six chapters on topics related to portfolio management, asset-liability management, insurance and pension issues. Here things slow down, and the focus often strays from inflation products. There is valuable information here, but most readers will pick and choose what they read according to their own needs.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">Overall, this is an outstanding book. Buy it for the first six chapters, any one of which is worth the price of the book, and then skim the later chapters as your interest dictates. For anyone who needs to go beyond the basics of the   inflation market, this book is the next step. </strong><b>[November 23, 2006]</b></p> <p align="center" class="body"> </p> </td> </tr> <tr> <td width="50%" valign="bottom"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table11"> <tr> <td width="100%"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> </tr> </table> </td> <td>  </td> </tr> </table> </div> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table12"> <tr> <td width="50%" bgcolor="#FFFFCC" align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" bgcolor="#FFFFCC" id="table13"> <tr> <td> <p class="body" style="margin-bottom: 6; margin-left:10"><b><font color="#333366" size="3">For related books, see sections:</font></b></p> <p class="body" style="margin:7; 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