The Information Content of Tips
20 Pages Posted: 4 Nov 2012
Date Written: March 1998
Abstract
On January 29th, 1997, an historical date for the U.S. Treasury, the first inflation-indexed Treasury notes, for a nominal value of 7 billion of dollars, have been auctioned. These securities are also called Tips (Treasury inflation-protected securities). Subsequently, the Chicago Board of Trade (CBOT) has proposed two contracts (a futures contract and a futures option) written on Tips. In this paper, after reviewing the characteristics of Tips and CBOT contracts, a pricing model is proposed.
Keywords: Treasury Inflation-Protected Securities, Cox-Ingersoll-Ross model, Siegel's paradox
JEL Classification: G12
Suggested Citation: Suggested Citation