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2

Maybe you would like to take a look at Managing forward volatility and skew risk for a direct and robust relation between spot-volatility correlation/covariance and the implied vol skew in the context of (fractional) stoch vol models. Although the result is for forward start case, by letting the forward start date equal spot date it is valid for spot ...


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It really depends for what purpose you are using the model. Let’s say you are using it for valuation of some instrument. If you want the fair market value, then a) is irrelevant and you would instead calibrate to the current term structure. For hedging , one usually means hedging the market value so again b) is appropriate. The only reason to use a) is to ...


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