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Showing results for tags 'inflation'.
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In an inflation swap, there are two parties to the deal. One party transfers the inflation risk, and the other party assumes the inflation risk. One party's assets are linked to a price index and the other party's assets linked to cash flow (which could be fixed or floating).
Inflation can be measured at the consumer or producer level, but always calculated the tendency for products to increase in price over time. Inflation levels are one of the best indications of future monetary policy bias with respect to interest rates, as central banks tend to increase interest rates when inflation levels rise drastically.
Private Currencies tend to be backed by commodities (such as gold or silver) so there there is some validity to their use in trading. Backing these currencies with commodities will increase the security of the currency and protect against inflation changes.