Calibration to FX triangles of the 4/2 model under the benchmark approach
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AbstractWe calibrate a novel multifactor stochastic volatility model that includes as special cases the Heston-based model of De Col et al. (J Bank Finance 37(10):3799–3818, 2013) and the 3/2-based model of Baldeaux et al. (J Bank Finance 53:34–48, 2015). Using a dataset on vanilla option quotes in a triangle of currencies, we find that the risk neutral approach typically fails for the calibrated model, in line with the results of Baldeaux et al. (2015).
2015 ◽
Vol 5
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pp. 451
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1998 ◽
Vol 01
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pp. 289-310
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1998 ◽
Vol 2
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pp. 33-47
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2008 ◽
Vol 11
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pp. 1-42
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