Although the effect of interest rate stochasticity can safely be ignored for short-dated exchange traded volatility … institutions. We therefore extend existing model-free results for the pricing of variance swaps and more general volatility …

We construct multi-currency models with stochastic volatility and correlated stochastic interest rates with a full … interest rate by a stochastic volatility displaced-diffusion Libor Market Model [AA02], which can model an interest rate smile …

performance analysis is made of the single and multiple curve LFPM, where we include four deterministic volatility specifications …-Exponential Volatility (LEV) specification and that deterministic breakpoints should be included, rather than random breakpoints …

, Jarrow, and Morton (1992) framework for commodity futures prices that incorporates stochastic volatility and stochastic … interest rate and allows a correlation structure between the futures price process, the futures volatility process and the … interest rate process. The functional form of the futures price volatility is specified so that the model admits finite …

We introduce the log-normal stochastic volatility (SV) model for the dynamics of a short interest rate in the Cheyette … positive implied volatility skews observed in fixed-income derivatives. We show that our model is robust because the short rate … process does not explode in finite time, in contrast to models which mix local rate dynamics with zero-correlated volatility …

.We address the problem of the consistency of the Black-Scholes model with the volatility surface and we show that, under general … conditions, the Black-Scholes formula cannot be generalized to account for the volatility smile …