Anmerkungen:
In: International Journal of Theoretical and Applied Finance, Vol. 12, No. 6, pp. 877-899, 2009
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 1, 2009 erstellt
Beschreibung:
It is a widely recognized fact that risk-reversals play a central role in the pricing of derivatives in foreign exchange markets. It is also known that the values of risk-reversals vary stochastically with time. In this paper we introduce a stochastic volatility model with jumps and local volatility, defined on a continuous time lattice, which provides a way of modeling this kind of risk using numerically stable and relatively efficient algorithms