Calibration to FX triangles of the 4/2 model under the benchmark approach
We 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 tria...
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| Veröffentlicht in: | Decisions in economics and finance 2022-06, Vol.45 (1), p.1-34 |
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| container_title | Decisions in economics and finance |
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| creator | Gnoatto, Alessandro Grasselli, Martino Platen, Eckhard |
| description | We 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
). |
| doi_str_mv | 10.1007/s10203-021-00330-1 |
| format | Article |
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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
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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
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2013
) and the 3/2-based model of Baldeaux et al. (J Bank Finance 53:34–48,
2015
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2015
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| subjects | Calibration Currencies Econometrics Economic Theory/Quantitative Economics/Mathematical Methods Economics Economics and Finance Finance Management Operations Research/Decision Theory Public Finance Stochastic models |
| title | Calibration to FX triangles of the 4/2 model under the benchmark approach |
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