Modeling Approaches
Stochastic instantaneous spot
Short rate - Hazard rate - Stochastic volatility
Stochastic instantaneous forward
Instantaneous forward rate - ??? - xi in the Bergomi model
Market traded
LIBOR/Forward swap rate - Forward CDS rate - Forward variance swap rate
Others (Not exactly modeling)
Yield - ??? - Implied volatility
Question: where does local volatility fit in?
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