Convergence of an Euler Scheme for a Hybrid Stochastic-Local Volatility Model with Stochastic Rates in Foreign Exchange Markets

We study the Heston–Cox–Ingersoll–Ross++ stochastic-local volatility model in the context of foreign exchange markets and propose a Monte Carlo simulation scheme which combines the full truncation Euler scheme for the stochastic volatility component and the stochastic domestic and foreign short interest rates with the log-Euler scheme for the exchange rate… CONTINUE READING