Inflation Risk Management

Pricing future inflation cash flows is an imprecise science, but the consequences of error and inaccuracy are often significant. Chatham’s unique approach of seamlessly integrated technology and advisory services bridges the gap often left by off-the-shelf pricing solutions.

Simplifying complexity: Our advisors have experience translating the underlying economics and documentation of inflation-linked cash flows into trade-worthy structures. We have also been involved in some of the largest inflation hedges ever traded. We explain risk in meaningful terms and help stakeholders make informed business decisions about both underlying assets and any hedging structures.

Extensive experience and diverse capabilities: We advise and execute on inflation-linked debt and derivatives for both buy- and sell-side clients, including:

  • Portfolio analysis and due diligence
  • Risk management strategy & policy
  • Hedge structuring
  • Bank selection and negotiation
  • Documentation
  • Market liquidity management
  • Execution
  • Valuation
  • Hedge accounting designation and effectiveness testing

Leading edge pricing: Unlike most other derivative products, inflation derivatives have “correct” approaches to pricing. Trade structures suitable for many applications include high levels of customization and off-the-shelf pricing technologies are typically unsuited to them.

Chatham’s proprietary in-house pricing systems have been developed by market-leading specialists and cover major currencies, including year-on-year and cumulative caps and floors (“LPI” structures), supported by our in-house quant team.