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tu160
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Posts: 363
Joined: October 23rd, 2007, 1:14 pm

FX scenario

July 28th, 2012, 2:44 am

I want to perform stress test / var calculation for portfolio of FX derivatives (one currency pair). How do I come up with reasonably meaningful scenario for spot rate / vol surface structure trajectories?Should I also simulate rates and take into account carry trade? What about interventions? Correlation with stock markets?Obvious way would be to run somerthing like Heston to come up with vol / spot interdependency, but Hestons calibration is not very stable and I am curious if any more direct usage of historical data is possible.Will be very grateful for any hints / references.
Last edited by tu160 on July 27th, 2012, 10:00 pm, edited 1 time in total.
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