The development of exotic options depending on the dynamics of implied volatilities calls for multi-factor stochastic volatility models (SVMs) such as the Bergomi variance curve model and the two-factor lognormal SVM. The former, based on the direct modelling of the joint dynamics of the spot and the implied variance swap volatilities, allows both a perfect fit to the Vix market and an easy Monte Carlo simulation.
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Calibration of lo
The week on Risk.net, July 7-13, 2018Receive this by email