Benhamou, Eric; Gauthier, Pierre - 2009
Volatility and Stochastic Interest rates. In this paper, we examine the combine effect of a Heston-type model for the underlying … see that stochastic volatility and stochastic interest rates have an impact on the resulting fair value of the contract … and the resulting fair fee as well as mainly on the vega hedge. Interestingly, using a stochastic volatility model leads …