I am trying to price an option on the Spanish CPI. The option is a European call with a single observation date. However, I am fairly new to inflation modelling, so there are two areas in which I would greatly appreciate any insights:
Market data: I have already retrieved some data on Euro zone inflation swaps. However, I have not been able to recover any volatility information. Are you aware of any instruments that can be used to obtain expected inflation and implied volatilities for the Spanish market?
Modelling framework: Given the simplicity of the option (and the potential lack of market data), my initial idea would be to keep things simple and employ a short rate model like Vasicek or Hull & White. However, I am not sure if I may be missing any relevant factors by using these models. Do you think this modelling framework could be appropriate in this particular case?