In the paper: FX volatility smile construction by Dimitri Reiswich & Uwe Wystup. It mentions the computation of premium-adjusted spot delta as follows (Page 6): enter image description here

As a beginner of FX option, I know the definition of dual delta is the partial derivative of option value to strike. But I can't understand what the idea of derivation is . Like:

  1. what is the connection of dual delta and PA spot delta?

  2. where does the first equation comes from?

The referenced paper is here: link


Your Answer

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

Browse other questions tagged or ask your own question.