Today we will begin posting, from our internal options live dashboard, daily vol surface snapshots to our Immersive Finance Market Insights Twitter account and more frequent updates to our dedicated Telegram channel.
One of the challenges for institutions is to translate the exchange traded instruments into a meaningful representation of the volatility surface and the subsequent embedding of that into their full pricing, risk, PNL and RV stack.
OTC traders, especially those from TradFi, will be familiar with viewing the surface in terms of risk reversals and (butter)flies with 25 and 10 delta being benchmark points.
The risk reversal, for a given delta, is the difference in vol terms between the call option and the put option. It gives a measure of the surface skew for the given expiry.
The (butter)fly for a given delta, is the average vol level of the call option and the put option relative to the at-the-money forward (ATMF).
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