2
$\begingroup$

I am looking at a Bloomberg FX vol surface quoted in 10 and 25 delta BF and RR. I know how to convert the RR and BF vols int 10D and 25D call and put vols, but I can't seem to imply a strike price from this.

Could someone please point me to a reference in this regard?

$\endgroup$
  • $\begingroup$ I agree with Gordon, here is another reference that is free... mathfinance.com/wp-content/uploads/2017/06/… The author doesn't talk about the SABR interpolation method as mentioned in Clark but you can find a lot of the details here too. $\endgroup$ – BrownianBread Aug 28 '18 at 8:52
1
$\begingroup$

The determination of the strikes are pretty complicated. It will depend on the types of the butterflies, that is, market or smile. Moreover, it will depend on the types of delta hedge ratios, that is, premium adjusted or not (i.e., in pct or in pips). I would suggest you go through Chapter 3 of the book Foreign Exchange Option Pricing by Iain J. Clark.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.