Inflation Linked Asset Swap Model

An inflation linked asset swap (ILAS) is a security in which a stream of inflation linked cash flows, that match the payments of an inflation linked bond, are swapped for a stream of cash flows that pay LIBOR plus a spread, or a fixed rate. The valuation of inflation linked asset swap considers only the case where the cash flows matching the bond coupon and principal repayments are linked to inflation by a scaling factor.