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Quantitative Finance · Glosarium

Apa itu Vanna–volga method?

Dikenal juga sebagai: vanna--volga method

Definition 20.3 Derivatives and Volatility · Bab 20 — FX Derivatives

The vanna–volga method prices an option as its Black price at the at-the-money volatility plus the smile cost of a portfolio of the three quoted instruments (25-delta put, at-the-money, 25-delta call) that matches the option’s vega, vanna and volga (chapter 4), all computed at the at-the-money volatility.

One-year smile of the chapter’s pair from 10-delta put to 10-delta call: the market, and the vanna–volga smile built from the 25-delta put, the at-the-money straddle and the 25-delta call. Exact at the pillars, close between them, low in the call wing. Data: the tutorial.
Figure 20.1. One-year smile of the chapter’s pair from 10-delta put to 10-delta call: the market, and the vanna–volga smile built from the 25-delta put, the at-the-money straddle and the 25-delta call. Exact at the pillars, close between them, low in the call wing. Data: the tutorial.

Contoh

Example 20.4 (Vanna–volga against the true smile)

Built from the three 25-delta pillars of Example 20.2, the vanna–volga smile matches the market to a few hundredths of a point between the pillars. At the 10-delta call strike it gives 7.94% against the market’s 8.91%, a point low (Figure 20.1). The 10-delta quotes carry information that the three pillars do not.

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