Title: Smile perfect match extension

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.

DOI: 10.1504/IJBD.2017.084917

International Journal of Bonds and Derivatives, 2017 Vol.3 No.2, pp.93 - 113

Received: 19 Jan 2016
Accepted: 14 Mar 2016
Published online: 09 Jul 2017 *

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