Implement via Monte Carlo the CEV parameterisation of spot FX with Gaussian rates in Section 10.2.1. For

Question:

Implement via Monte Carlo the CEV parameterisation of spot FX with Gaussian rates in Section 10.2.1. For spot FX , use 85, for CEV vol use 0.15 x 85^1−β Try it with β = 0.2, 0.5, 0.9. What values of β would give a comparable skew if interest rates vols are 0%?

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