A highly path-dependent inflation swap (LPI swap) that has an inflation leg vis-à-vis an interest payment. It involves one payment at maturity date, and the final payment is based on the limited price index value times the notional amount of the swap. In this sense, the first leg of the swap is the fixed portion (it pays an amount in British pounds based on the swap par coupon rate. The second portion is the inflation-linked leg, whose final payment depends on the limited price index.

This swap is particularly instrumental for pension funds whose liabilities (or part thereof) are related to the limited indexation of pensions in deferment. The zero-coupon LPI swap is collared by a cap and a floor (e.g. 0%- 3%, 0%-5%, etc)