Linked Questions
22 questions linked to/from FX Options price vs implied vol
16
votes
4
answers
12k
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What is the importance of alpha, beta, rho in the SABR volatility model?
I just read that SABR model is a stochastic volatility model, which attempts to capture the volatility smile in derivatives markets. The name stands for "stochastic alpha, beta, rho", referring to the ...
- 181
3
votes
3
answers
3k
views
FX Option pricing on Forward vs. Spot
In a GBM world with riskless domestic and foreign interest rates, what would be the correct model for a FX plain vanilla option given the statement that this option is priced on the forward? I guess ...
- 163
6
votes
2
answers
3k
views
Garman-Kohlhagen (Black-Scholes) Formula vs. Bloomberg OVML Calculator
I'm trying to price a European call option on USDJPY. We have that $S = 112.79, K = 112.24, \sigma = 6.887\%, r_d = 1.422\%, r_f = -0.519\%, T = 0.25$. My model, based on Black-Scholes, returns the ...
- 440
6
votes
2
answers
1k
views
how to calculate vega in stochastic vol?
since vega is defined as option value changes regarding the implied vol parallel shift, how is vega defined or calculated in stochastic vol models since implied vol is not an input there? thank you.
- 121
3
votes
2
answers
4k
views
Using FX ATM/RR/BF Volatility to Estimate Smile
Suppose $S$ is some FX rate, EUR/USD say, and $\sigma_{S}(K,T)$ is the implied volatility for some option written on $S$, sourced from the surface $\sigma_{S}(\cdot,\cdot)$ (alternatively, consider ...
- 632
2
votes
4
answers
3k
views
Premium Adjusted Delta in fx market
Please explain the concept of premium Adjusted Delta in FX market. In EURUSD, why delta changes if premium currency is changed from USD to EUR and how this new delta is related to the old one with ...
- 547
1
vote
1
answer
3k
views
FX Spot Delta market standard calculation (Trader View)
I am just writing my thesis about FX instrument and hedging and one question popped up which I can't solve. Maybe it is silly but cant find anything about it how the delta of a fx spot is defined and ...
- 107
1
vote
1
answer
1k
views
Why is implied volatility often higher for OTM/ITM european call options than ATM? [closed]
I am working on some Black-Scholes stuff and currently investigating implied volatility (IV). I understand that the typical volatility smile can be viewed as a criticism of the assumption about ...
- 41
3
votes
1
answer
2k
views
Smile Strangle and Market Strangle
What is the difference between Smile Strangle margin and Market Strangle Margin in fx derivative market? Is it just variation in convention or is there any mathematical relationship between the two?
- 547
1
vote
2
answers
449
views
FX option quotation in interbank market
I am looking at the different ways in which FX options (say EUR/USD option) are quoted in interbank markets.
Is it quoted using the option chain? I also saw a piece where it is said that it is quoted ...
- 113
4
votes
1
answer
881
views
FX Option Price Quotation
I'm trying to replicate the following FX vanilla option pricing exercise (and the conversion between the quote types), taken from Wystup (2006).
A call's value today is well-known given by BS / ...
- 645
0
votes
2
answers
303
views
Requesting for price?
Just for education purpose. Assuming I have some trading ideas that involves the use of OTC derivatives but I may not be able to put them into practice due to regulatory issues and huge minimum ...
user59094
3
votes
3
answers
891
views
Vega in a "constant volatility" Black-Scholes world?
A little confused, I consulted the Wilmott forums for guidance on how I can interpret vega/vomma. Another user's post reminded me that the Black-Scholes model assumes that the underlying has constant ...
- 33
1
vote
2
answers
230
views
Does fear or greed drive option prices?
Frequently we hear that implied volatility being higher (as measured by VIX) indicates fear in the stock market. It is assumed that investors buy more puts for downside protection, driving put option ...
- 181
0
votes
1
answer
495
views
Implied volatility and realized volatility
There are many articles and posts here claiming that the implied volatility is the expectation of future realized volatility. I don't understand. To begin with, isn't implied volatility homogeneous to ...
- 1