Hi,
I'm trying to understand how my company valuate its FX-options. They are not using the historical, nor the implied volatility. Instead they are using something called the theoretical volatility with some stochastical input. Could anyone please give me an example on how this normally is done or give me a link to an illustrative example? How is the theoretical volatility in an FX-option estimated and plotted?
Thanks
Nicholas
I'm trying to understand how my company valuate its FX-options. They are not using the historical, nor the implied volatility. Instead they are using something called the theoretical volatility with some stochastical input. Could anyone please give me an example on how this normally is done or give me a link to an illustrative example? How is the theoretical volatility in an FX-option estimated and plotted?
Thanks
Nicholas