Authors: Christian Kamtchueng
Addresses: CTK Corp., London, UK; ESSEC, Paris, France
Abstract: In this paper, we present a model, the SPM, which performs a good 'perfect' calibration of the smile. Between the Black and Scholes and the Local Vol, the SPM was developed a decade ago. In the first part, we present the classic implementation then in a second part we introduce some extensions; one reflecting the correlation skew and another one implying a temporal copula fitting via the OTC market.
Keywords: smile perfect match; SPM; pricing; correlation skew; FX triangle.
International Journal of Bonds and Derivatives, 2017 Vol.3 No.2, pp.93 - 113
Received: 19 Jan 2016
Accepted: 14 Mar 2016
Published online: 27 Jun 2017 *