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Risk Reversal Help
Morning Everyone - Was hopeing someone might be able to help me on this, i need a formula for working out what the vols should be ?E.g. if i have a 2yr eurczk 25 dta rr at 0.2 - how do i work out what the vols should be ?thanks vm
Risk Reversal Help
You can't, you need strangle 25 delta quote as well. Between them they define the shape of the skew curve.When you have atm and str you can use the following.vol for 25 delta call = str+rr/2put 25 delta = str-rr/2
Risk Reversal Help
QuoteOriginally posted by: thomssiYou can't, you need strangle 25 delta quote as well. Between them they define the shape of the skew curve.When you have atm and str you can use the following.vol for 25 delta call = str+rr/2put 25 delta = str-rr/2so if the atm is 4.05 for the 2yr, with rr obviously 0.2 and 2yr flies about 0.2 as well... what would be the calculation to get the vols ?
Risk Reversal Help
QuoteOriginally posted by: tricky69QuoteOriginally posted by: thomssiYou can't, you need strangle 25 delta quote as well. Between them they define the shape of the skew curve.When you have atm and str you can use the following.vol for 25 delta call = str+rr/2put 25 delta = str-rr/2so if the atm is 4.05 for the 2yr, with rr obviously 0.2 and 2yr flies about 0.2 as well... what would be the calculation to get the vols ?25d call = 4.05 + 0.2 + 0.2/2 = 4.3525d put = 4.05 + 0.2 - 0.2/2 = 4.15