Does modelling stochastic interest rates, beyond stochastic volatility, improve pricing performanceon long … stochastic volatility and stochastic interestrates and a correlation structure between the underlying variables. We examine the … on long-dated crude oil derivatives, when the interest rate volatility is relatively high. Furthermore, increasing the …

model with a time-dependent stochastic local volatility function allowing the model to simultaneously fit the implied … volatility surfaces of commodity and interest rate options. Since liquid market prices are only available for options on … volatility smiles is constructed. Finally, the model is fitted to an exogenously given correlation structure between forward …

two regimes, which we associate with low and high return volatility. High volatility regimes are, as expected …