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How is the FX vol smile constructed in Bloomberg?
Posted: November 3rd, 2013, 4:58 am
by simonwu19830816
Does anybody know how the FX volatility smile is constructed in Bloomberg?Thanks!
How is the FX vol smile constructed in Bloomberg?
Posted: November 3rd, 2013, 7:04 pm
by VolMaster
They use Vanna-Volga interpolation for most pairs (maybe Heston for EM, but not sure, i can check with them for you)
How is the FX vol smile constructed in Bloomberg?
Posted: November 4th, 2013, 2:15 am
by simonwu19830816
Thanks, VolMaster!I have tried with quick recalibration in Bloomberg. It seems that Bloomberg uses 25 Delta BF and RR to construct the vol smile. I tried to match with quadratic delta vol smile construction, but failed. If you can confirm with them to see what interpolation method they use, that be greatly helpful to me. Thanks again!
How is the FX vol smile constructed in Bloomberg?
Posted: November 4th, 2013, 4:05 am
by VolMaster
I know that they use the 25s for strikes between the ATM and 25d strikes and 10d for the strikes of 10d-25d, lower deltas are extrapolated using quadratic spline. I will confirm with them though
How is the FX vol smile constructed in Bloomberg?
Posted: December 2nd, 2013, 10:34 am
by giladr
Actually they provide 2 methods: Vanna-Volga and SLV, and you can choose what px to get.Their SLV method is explained in a paper by Tataru, Fisher and Yu.