Recently it seems that we are seeing Mervyn King's pallid and forelorn face appearing on our screens with monotonous regularity these days, as he announces yet more doom and gloom for the UK economy. At the Mansion House speech that he made yesterday, the owlish governor re-iterated the parlous state of the UK housing market and clearly stated that inlfation was set to rise. The UK, it seems, is set for a bumpy ride in the coming weeks.

Being a positive sort however, this augurs well for the OTC derivatives markets and presents some interesting opportunities for the buy side. Volatility, as they say, is the mother of opportunity, and my guess is that the volumes of inflation related derivatives is set for boom times. and here is why...

Inflation products have actually been around for donkey's years*. Whether they are index-linked bonds or derivative products linked to inflation indices, ...   more »