Let's say I am pricing a cross asset hybrid product which is dependent on the CMS spread of a particular currency and a commodity with a futures curve that has a significant probability of moving into contango from its current backwardation condition.Let's assume that I'm using an n-factor interest rate model and an m-factor commodity model, where n,m>1. How can I determine the correlations between the multiple factors of the 2 models? Even if I estimate the historicals, I could not break down the correlation to the level of individual factors. Anyone tackling similar problems in the pricing of hybrids?

There is a simple but workable solution to this problem. See p610 and p611 of the 2nd edition of Brigo and Mercurio. I've used it before and it seems pretty reasonable.

Thanks, was thinking along somewhat similar lines. I guess we can't run away from introducing a few simplying heuristics on cross factor correlations.