Please use this identifier to cite or link to this item:
Reiswich, Dimitri
Wystup, Uwe
Year of Publication: 
Series/Report no.: 
CPQF Working Paper Series 20
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 detailed overview of these quoting mechanisms and introduce the resulting smile construction problem. Furthermore, we provide a new formula which can be used for an efficient and robust FX smile construction.
FX Quotations
FX Smile Construction
Risk Reversal
Delta Conventions
Malz Formula
Document Type: 
Working Paper

Files in This Item:
405.28 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.