| Gnoatto, Alessandro (2017): Coherent Foreign Exchange Market Models. In: International Journal of theoretical and Applied Finance, Vol. 20, No. 1, 1750007 |
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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.].
| Item Type: | Journal article |
|---|---|
| Faculties: | Mathematics, Computer Science and Statistics > Mathematics |
| Subjects: | 500 Science > 510 Mathematics |
| ISSN: | 0219-0249 |
| Language: | English |
| ID Code: | 55636 |
| Deposited On: | 14. Jun 2018 09:59 |
| Last Modified: | 04. Nov 2020 13:35 |
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