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I understand that Stochastic Vol Models should be used when Exotic Option payoff is Volatility dependent (such as Variance Swaps and Volatility Swaps).

Stochastic Vol Models should also be used when Exotic Option has forward starting features (such as Cliquet Options). Can someone explain why should we use Stochastic Vol Models for forward starting options?

Also, given an Exotic Option, how would you decide whether to use Local Vol or Stochastic Vol models for pricing?


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