When designing multi-asset stochastic volatility (SV) or local-stochastic volatility (LSV) models, one of the main issues involves the construction of the global correlation matrix. Typically correlation matrices for each assets' degrees of freedom are set and the challenge is to build a global...

We examine local-stochastic volatility models and derive a simple condition such models need to obey so that the carry P&L of a delta-hedged/vega-hedged position makes sense in a trading context.We give examples of admissible and non-admissible models and discuss the issue of the delta position...