Hi what do people use as F/X vol in pricing quantos. ATMs? Also is it common to have a time varying correlation? Thanks.

I would say the same asumptions than pricing non-quanto: skew or smile sensitive deals like barriers need not only ATM but OTM

ATM Vols is relaltively Common but depends on what you price (does your option depend on skew for example?)Term structure of correlations is mandatory.

For typical normal market size quantos (as in equity quanto into a foreign currency) for most situations it hardly matters at all whether you use the ATM spot FX vol, the ATM-fwd FX vol, etc, as the quanto vega is usually small enough that the overall option bid-offer is way larger.However, in large (let's say over $1bn for argument's sake) options it can matter. And I think there is a "relatively correct" way of doing it!As a thought experiment, imagine that you set up a full two factor simulation and let's say you decide that local vol is good enough for pricing your derivative. Run your MC sim and you will be able to easily test which vols your quanto is sensitive to. Just bump the input FX implied vols at a given strike, recalc and subtract, and you get a "vega by strike report".I bet that you would often get a relatively broad exposure for "FX vega by strike" which would indicate that either a vol swap level or a variance swap level would be best if you were really going to hedge it to death.This sort of "unasks" your question: you should use the entire vol surface, and not just one vol (if the thing is huge).But again for practical everyday sized options, ATM-spot or ATM-fwd FX vols are good enough.

A simple approach : Using the fundamental relationship between Quanto-Forwards and Nominal forwards I would use ATM FX vols. If you have a 2-year Quanto trade, use the 2-year ATM fx vol. If you have a 5-year Quanto, you use the 5-year ATM fx vol.M.