I always find myself in the unknown charted territory when it comes to non-Linear Instruments. I come across the scenario, How to value the option using Delta Vol surface?


I have CME traded Soybean option(900 strikes, Underlying traded future (spot) trading at 880 USD-cents/BU) with dec maturity and delta surface from the Bloomberg.

a) I need to plug out implied volatility from the delta surface and Plug back into the same vol into Black-76.Ho should I go about it. Delta greeks need Implied vol. as input. It is chicken and egg story.

b) If for the same option I need to work it out the historical VaR. How should I calibrate my delta surface to calculate the historical VaR.

Your responses on the concern will be appreciated.

  • $\begingroup$ This question is rather unclear; I cannot tell what it's really asking. $\endgroup$ – Brian B Nov 5 '15 at 14:23
  • $\begingroup$ Hello Brian, Appreciate reading me question . The value an option Black 76 model requires (K,S,r, Vol, t). All the parameter are available except implied vol. Bloomberg publish the delta vol. surface.My question is how would i know what delta should i use to fetch the Vol from the delta vol. surface because the Delta Greeks also required implied Vol . Can i use the at the money vol to work it out the delta and search the Vol from the delta vol. surface. $\endgroup$ – user1131338 Nov 6 '15 at 14:40

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