AHLIP, REHEZ - In: International Journal of Theoretical and Applied … 11 (2008) 03, pp. 277-294
In this paper, we present a stochastic volatility model with stochastic interest rates in a Foreign Exchange (FX) setting. The instantaneous volatility follows a mean-reverting Ornstein–Uhlenbeck process and is correlated with the exchange rate. The domestic and foreign interest rates are...