General Equilibrium Pricing of CPI Derivatives

We value forward, futures and options contracts written on the Consumer Price Index. To this aim, we build the general equilibrium of a continuous time monetary economy affected by both real and nominal shocks. Solutions are derived, for the price level, the inflation rate and CPI derivatives, the latter being expressed inclosed form in a particular case.

LIOUI, A. and PONCET, P. (2005). General Equilibrium Pricing of CPI Derivatives. Journal of Banking and Finance, pp. 1265-1294.