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danielliu
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Joined: July 26th, 2006, 11:30 am

IF EUR/USD appreciated from 1.31 to 1.35 the vol of atm vol and 25d vol ,which one vol is go up faster?

January 4th, 2007, 7:50 am

Hi:If we say eur/usd is appreciated from 1.31 to 1.35 ,the vol will be going up ,but which one will run faster ? ( if atm vol or 25d vol )
 
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wayone
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Joined: March 13th, 2003, 12:46 pm

IF EUR/USD appreciated from 1.31 to 1.35 the vol of atm vol and 25d vol ,which one vol is go up faster?

January 5th, 2007, 4:42 pm

I suppose you mean 25-d Euro Call, its vol ~ ATM + BF + RR/2. If the spot grows quickly then ATM will go up (the spot-vol correlation is positive for EUR since RR > 0) and RR will go up too (typically the spot-RR correlation is very high) and BF probably will not change and the answer is obvious since 25-d vol is the sum of them. If the move is very sudden and big, BF may go up too.Probably a good question is what changes more ATM or RR for sudden one-way moves? However, if the spot drifts slowly, say it takes 1y to drift from 1.31 to 1.35 then probably this move itself won't affect ATM and RR because of some sort of mean reversion in vol.
 
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flairplay
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IF EUR/USD appreciated from 1.31 to 1.35 the vol of atm vol and 25d vol ,which one vol is go up faster?

January 6th, 2007, 6:35 am

QuoteOriginally posted by: danielliuHi:If we say eur/usd is appreciated from 1.31 to 1.35 ,the vol will be going up ,but which one will run faster ? ( if atm vol or 25d vol )Can I answer this with a question:Why do you think vols change?