The inflation derivatives market has taken its next big step. Inflation swaps have been truly liquid for some time, particularly in the UK and Europe. Now, it seems, this is increasingly true of the options market.

The driver for this new-found liquidity is the popularity of inflation range accruals. These products allow investors to take a view on whether inflation will remain stable; if the relevant consumer price index breaks out of the pre-specified range, the investor receives a reduced