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

New contributor
Jayfish is a new contributor to this site. Take care in asking for clarification, commenting, and answering. Check out our Code of Conduct.

Your Answer

Jayfish is a new contributor. Be nice, and check out our Code of Conduct.

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.