Questions tagged [smile]

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FX smile extrapolation

Typically, 5 points data is available for smile construction : 25D RR, 25D SM, 10D RR, 10D SM and ATM. Questions: 1. How is a smooth smile curve generated with the help of these? 2. How is ...
2
votes
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How does the volatility skew/smile relate to hedging/trading vanilla contracts?

I know that obtaining and calibrating the smile is important in the hedging and trading of exotics since we use vanillas to hedge and price exotics. How is the smile important in the hedging and ...
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stochastic volatility and smile

Can we say that the volatility smile contain for sure stochastic volatility information ? If yes why ? Saying that BlackScholes does not explain the smile does not necessary mean there is an ...