Korean J. Math. Vol. 23 No. 1 (2015) pp.81-91
DOI: https://doi.org/10.11568/kjm.2015.23.1.81

Local volatility for quanto option prices with stochastic interest rates

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Youngrok Lee
Jaesung Lee


This paper is about the local volatility for the price of a European quanto call option. We derive the explicit formula of the local volatility with constant foreign and domestic interest rates by adapting the methods of Dupire and Derman \& Kani. Furthermore, we obtain the Dupire equation for the local volatility with stochastic interest rates.

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