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Assuming constant correlation and volatility there're pricingmodels like Margrabe. However, can anyone pinpoint me to articles etc. assuming even these factors are stochastic (or in a certain level at specified prob.) ? How relevant do you consider i.e stochastic correlation to me in this case?

I think that there are so many uncertain variables in the problem that adding another is not going to add any more value ...

Thank you quadrature, but do you have any useful comments also??You mean Oztukel and others are just doing unrealistic tecnobabbeling..., or what?

I thought my comment was quite useful .. I am a big believer in Keeping it simple. Where are u going to observe the correlation skew ? Can u isolate from other biases in the market ?

Skewed vol is something observable, because people doesnt belive in the simple assumptions of b&s, right? What says correlation should be affected by the same flaws/skew? I guess the only thing one knows is the historical correlation, by some assumtions, and thats even more stochastic behaviour than voll ?