UK Swap RPI Model

---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 03/31/2000
03:02 PM ---------------------------

Zimin Lu
03/31/2000 01:45 PM
To: Vince J Kaminski/HOU/ECT@ECT, Maureen Raymond/HOU/ECT@ECT
cc:
Subject: UK Swap RPI Model

---------------------- Forwarded by Zimin Lu/HOU/ECT on 03/31/2000 01:44 PM
---------------------------

Martina Angelova
03/22/2000 02:59 PM
To: Zimin Lu/HOU/ECT@ECT
cc: Anjam Ahmad/LON/ECT@ECT, Trena McFarland/LON/ECT@ECT
Subject: UK Swap RPI Model

Hi Zimin!

Please find attached the RPI model I developed by bootstrapping RPI swaps.
The structure of this particular swap is:

semi/semi Act/365F
<
< YOYUKRPI = (UKRPI(p-2)/UKRPI(p-14) - 1)/2
< p = payment month
<
The first payment is the latest known historical RPI, February 2000. You will
notice that I have assumed constant cashflows between the quoted years (as
opposed to interpolating swaps which distorts the curve a lot).

Please find below a graphic comparison between the RPI curve produced by
swaps and the one produced by the GILT market.

Looking forward to your comments.

Best regards,

Martina
x34327