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assume I have implied FX volatility Delta-Term table from broker. I have time noticed as 2M, 3M. what do I have to put into BS formula, is it 2/12 or "count the business days"/"daycount basis"? I am confused with the notion of time.

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Its 2months and 3 months, respectively, adjusted for banking holidays that may fall on the sought after day and the local convention of whether you then move to the next or previous business day.

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  • $\begingroup$ so, my second calculation, right (count the business days/daycount basis)? $\endgroup$ – 4pie0 Mar 3 '13 at 16:03
  • $\begingroup$ generally yes. Its much more precise $\endgroup$ – Matthias Wolf Mar 3 '13 at 16:07
  • $\begingroup$ ok, but for 1y (and only) thankfully it will be still just 1? and regardless convension $\endgroup$ – 4pie0 Mar 3 '13 at 16:21
  • $\begingroup$ No for any tenor you should optimally derive the precise expiration date using local market conventions. $\endgroup$ – Matthias Wolf Mar 3 '13 at 16:36
  • $\begingroup$ so what means 1y? if this is "business days in 1y"/"daycount" so i.e. 252/365 ? $\endgroup$ – 4pie0 Mar 3 '13 at 17:29

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