Publication
Title
FX volatility smile construction
Author
Abstract
The foreign exchange options market is one of the largest and most liquid OTC derivative markets in the world. Surprisingly, very little is known in the academic literature about the construction of the most important object in this market: The implied volatility smile. The smile construction procedure and the volatility quoting mechanisms are FX specific and differ significantly from other markets. We give a brief overview of these quoting mechanisms and provide a comprehensive introduction to the resulting smile construction problem. Furthermore, we provide a new formula which can be used for an efficient and robust FX smile construction.
Language
English
Source (journal)
Wilmott
Publication
2012
ISSN
1540-6962
Volume/pages
60(2012), p. 58-69
Full text (Publisher's DOI)
UAntwerpen
Faculty/Department
Publication type
Subject
External links
Record
Identification
Creation 28.02.2015
Last edited 21.11.2016