Inflation, Index-Linked Bonds, and Asset Allocation
Open accessAbstract
The recent introduction of CPI-linked bonds by several financial institutions is a milestone in the history of the U.S. financial system. It has potentially far-reaching effects on individual and institutional asset allocation decisions because these securities represent the only true long-run hedge against inflation risk. CPI-linked bonds make possible the creation of additional financial innovations that would use them as the asset base. One such innovation that seems likely is inflation-protected retirement annuities. The introduction of index-linked bonds eliminates one of the main obstacles to the indexation of benefits in private pension plans. A firm could hedge the risk associated with a long-term indexed liability by investing in index-linked bonds with the same duration as the indexed liabilities.
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Recently several financial institutions have introduced financial instruments linked to the CPI.
“Indeed, recently several financial institutions have introduced financial instruments linked to the CPI.”
From Pensions as Retirement Income Insurance (1989) · cites this paper as Bodie (1988)
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- Authors
- Bodie, Z.
- Affiliations
- Boston University (US)
- Corresponding author
- Bodie, Zvi
- Venue
- The Journal of Portfolio Management
- Publisher
- National Bureau of Economic Research
- Published
- 1988-12
- Volume
- 16
- Issue
- 2
- Pages
- 48-53
- ISSN
- 0095-4918 (ISSN-L)
- OpenAlex
- W1992076379
- Cited by
- 52
- References
- 5
- Citations by year
- 2023: 1 · 2022: 2 · 2019: 1 · 2018: 2 · 2017: 2 · 2014: 1 · 2013: 5 · 2012: 6
- FWCI
- 5.01
- Type
- journal article
- Language
- en
- Open access
- green
- doi.org
- Locations
- The Journal of Portfolio Management (publishedVersion)
- National Bureau of Economic Research (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- SSRN Electronic Journal (submittedVersion)
- National Bureau of Economic Research (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
- Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy, Pension, Retirement Analysis
- Social Sciences › Economics, Econometrics and Finance › Finance › Credit Risk and Financial Regulations
- Keywords
- inflation-indexed bonds, asset allocation, inflation risk, inflation protection, retirement annuities, financial innovation, duration matching
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