Volatility and inflation

As we enter 2011 there is the usual round of forecasts as to how various markets will fare this year. As usual the predominant view is bullish on equities. In the world of structured products this is not of great import as structures can be created to take advantage of any set of expected market movements. What is of interest though, is that if the pundits are right then we might expect volatility to remain low relative to its range over the last couple of years. Low volatility means that the premium received for selling options falls (i.e. how soft protection is created), resulting in t...