I'm looking to replace the FX vol interpolation scheme at my firm, and was wondering what the industry standard was.
We used to do vanna-volga, but it only takes 3 points (25dp, atm, 25dc), and so doesn't fit well on 10dp, 10dc. We could do a vanna-volga on (10dp, atm, 10dc), and somewhat mix the 25d and 10d smiles together, but that doesn't sound great.
I'm assuming there is some kind of industry standard to interpolate a 5-point smile (10dp, 25dp, atm, 25dc and 10dc) properly. Probably some kind of curve fitting in delta space? Any idea?