Inflation is normal

Year-on-year inflation smile data has become more available since late 2007 with the publication of cap and floor prices on Bloomberg ( 1). The Bloomberg tickers are also now present, for example, for 10-year 2.5% HICPx caps it is EUISCA10 . Prices are published on RILO with strikes ranging from -1% to 6% depending on the underlying2 and the theoretical possible range for year-on-year inflation is (-100%, infinity). Given that negative strikes are reasonable, market practice is to start from

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