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Correlation smile on equity exo
Just a thought, I don't think most banks price the correlation smile in their equity ex products nor do they price it in their system.Has anyone heard of a paper that would deal with this issue ? I am more interesting to understand how to determine correlation smile on equity. guess we can come up with something based on arbitrage with credit but not sure it gives a real approx of the risk on the 80%, 70% zone.