Longstaff, Francis A.; Lustig, Hanno; Fleckenstein, Matthias - National Bureau of Economic Research (NBER) - 2013
We study the nature of deflation risk by extracting the objective distribution of inflation from the market prices of … inflation swaps and options. We find that the market expects inflation to average about 2.5 percent over the next 30 years … to other types of tail risks such as catastrophic insurance losses. In contrast, inflation tail risk has only a …