What is MLV??Yes, but you are looking at this the wrong way round maybe. These external backbones were introduced, because the models weren't performing. Vice versa, introducing an external backbone and not using the model implied one, obviously invalidates part of the model. Then at some point the question becomes, why do you want to use a differentially specified stochastic vol model in the first place??Anyway, so if you do want a backbone, then SABR accomodates a continuous range of exponents.
Last edited by mtsm
on November 12th, 2015, 11:00 pm, edited 1 time in total.