LPI swaps with a smile

LPI swaps with a smile

business graph

Limited Price Index (LPI) swaps are zero-coupon inflation swaps on capped and floored year-on-year (YoY) rates. They are particularly liquid on the UK market, where some pension plans are linked to this index. The floor is typically at 0% and the caps can be 3%, 5% or +∞. They are quoted as a spread over the inflation-linked zero-coupon rates.

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