Local correlation families
Local correlation models allow for better hedging by incorporating changes in co-dependence in the delta. Using the particle method and affine transforms, Julien Guyon builds families of local correlation models that calibrate to the market smile of a basket and allow for a view on correlation skew or other properties
Many practitioners use a multi-dimensional version of the local volatility (LV) model to price multi-asset derivatives, such as basket options.
Local correlation families
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