CUTTING EDGE: INFLATION-INDEXED SECURITIES Inflation with a smile - In the current inflation-indexed markets most traded options have zero or even negative strikes. This highlights the need for a smile-consistent valuation of caps and floors on inflation rates. To this end, the authors propose a stochastic volatility model for forward consumer price indexes, with volatility dynamics following a ...
| Year of publication: |
2006
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| Authors: | Mercurio, Fabio ; Moreni, Nicola |
| Published in: |
Risk : managing risk in the world's financial markets. - London : Incisive Financial Publ, ISSN 0952-8776, ZDB-ID 10494753. - Vol. 19.2006, 3, p. 70-75
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