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.].
|Titolo:||COHERENT FOREIGN EXCHANGE MARKET MODELS|
GNOATTO, Alessandro (Corresponding)
|Data di pubblicazione:||2017|
|Appare nelle tipologie:||01.01 Articolo in Rivista|