On the Simulation of a Quanto Process Under Local Volatility

9 Pages Posted: 2 Jul 2012

Date Written: September 2, 2011

Abstract

It is well known that a Quanto Process based on Lognormal Equity and Lognormal exchange rate processes can be easily simulated through a Lognormal process with modified drift. We study here what happens when both processes follow a local volatility model. In addition, we analyze the impact of the choice of the equity volatility in the case of the lognormal formula for the Quanto and the Compo options.

Keywords: Quanto, Option, Finance, Local Volatility, Displaced Diffusion

Suggested Citation

Le Floc'h, Fabien, On the Simulation of a Quanto Process Under Local Volatility (September 2, 2011). Available at SSRN: https://ssrn.com/abstract=2097921 or http://dx.doi.org/10.2139/ssrn.2097921

Fabien Le Floc'h (Contact Author)

Calypso Technology ( email )

106 rue de la Boetie
Paris, 75008
France

Independent ( email )

France

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