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ZM2022
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Posts: 3
Joined: October 13th, 2022, 4:26 pm

Vanna Volga formula for Fx Digital option

October 17th, 2022, 1:42 pm

Hi, I am working on pricing the FX digital option using Vanna Volga. We know that the formula of Vanna volga of Vanilla call option is,
Image
A digital call option can be approximated by a call spread
Image
Then  the Vanna Volga price of digital call option is
Image
But using this formula can not give the right price in short maturities OTM cases in comparison to Bloomberg price.
 
ZM2022
Topic Author
Posts: 3
Joined: October 13th, 2022, 4:26 pm

Re: Vanna Volga formula for Fx Digital option

October 17th, 2022, 6:07 pm

I Do not know why the images are not showing is there any solution to that issue.
 
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Alan
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Joined: December 19th, 2001, 4:01 am
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Re: Vanna Volga formula for Fx Digital option

October 17th, 2022, 7:07 pm

Linking to images frequently doesn't work. Instead, download them to your computer and then upload as .png or .jpeg attachments. Placing them inline is often best when doing that. Look for "Attachments" at the bottom of the full editor dialog.