Counterexamples for FX Options Interpolations -- Part I

Jherek Healy

Papers from arXiv.org

Abstract: This article provides a list of counterexamples, where some of the popular fx option interpolations break down. Interpolation of FX option prices (or equivalently volatilities), is key to risk-manage not only vanilla FX option books, but also more exotic derivatives which are typically valued with local volatility or local stochastic volatilility models.

Date: 2025-12
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