article

Alvise De Col, Alessandro Gnoatto, Martino Grasselli


Finance Group (2013) : Smiles all around: FX joint calibration in a multi-Heston model




Smiles all around: FX joint calibration in a multi-Heston model

Alvise De Col, Alessandro Gnoatto, Martino Grasselli




article

Journal of Banking & Finance

We introduce a novel multi-factor Heston-based stochastic volatility model, which is able to reproduce consistently typical multi-dimensional FX vanilla markets, while retaining the (semi)-analytical tractability typical of affine models and relying on a reasonable number of parameters. A successful joint calibration to real market data is presented together with various in- and out-of-sample calibration exercises to highlight the robustness of the parameters estimation. The proposed model preserves the natural inversion and triangulation symmetries of FX spot rates and its functional form, irrespective of choice of the risk-free currency. That is, all currencies are treated in the same way.

To cite this publication :


Giorgia Callegaro, Lucio Fiorin, Martino Grasselli: Quantized calibration in local volatility models. Dans: Risk Magazine, 9 , p. 62-67, 2015, ISSN: 0952-8776.





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