Reply To: What is Risk Reversal and Delta Strangle ?

#6616
Israr Ahmed
Keymaster

The name comes from option strategies .
Risk Reversal : http://en.wikipedia.org/wiki/Risk_reversal
Delta Strangle : http://en.wikipedia.org/wiki/Strangle_(options)

In the context of the question both these numbers are a way to measure the shape of the Volatility Smile.

Risk Reversal gives a measure of vol-skew.

25 Delta Risk Reversal = Vol 25 Delta Call – Vol 25 Delta Put

Delta Strangle gives a measure of the curvature of the volatility smile.

25 Delta Strangle = ( Vol 25 Delta Put + Vol 25 Delta Call ) / 2 – Vol ATM

Download PDF version

This field is for validation purposes and should be left unchanged.