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kongwenb
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Joined: November 17th, 2010, 5:58 pm

How to price callable FX Range Accrual

June 3rd, 2011, 4:27 pm

Any idea? Thanks in advance.
 
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torquant
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Joined: November 13th, 2005, 1:47 pm

How to price callable FX Range Accrual

June 7th, 2011, 3:01 am

Non-callable range accrual is a collection of digitals, so need to use vanilla replication here, specifically vol skew/smile. Callable RAs are therefore sensitive to forward vol skew/smile, so choose your model appropriately -- local & stoch vol mixture + jumps is best suited model at the moment.