Coherent Foreign Exchange Market Models

Gnoatto, Alessandro (2017): Coherent Foreign Exchange Market Models. In: International Journal of theoretical and Applied Finance, Bd. 20, Nr. 1, 1750007

Abstract

A model describing the dynamics of a foreign exchange (FX) rate should preserve the same level of analytical tractability when the inverted FX process is considered. We show that affine stochastic volatility models satisfy such a requirement. Such a finding allows us to use affine stochastic volatility models as a building block for FX dynamics that are functionally-invariant with respect to the construction of suitable products/ratios of rates, thus generalizing the model of [A. De Col, A. Gnoatto & M. Grasselli (2013) Smiles all around: FX joint calibration in a multi-Heston model, Journal of Banking and Finance 37 (10), 3799-3818.].

• Dokumententyp: Zeitschriftenartikel
• Fakultät: Mathematik, Informatik und Statistik > Mathematik > Finanz- und Versicherungsmathematik
• Themengebiete: 500 Naturwissenschaften und Mathematik > 510 Mathematik
• ISSN: 0219-0249
• Sprache: Englisch