Trading FX implied volatility – part II

- By FX Markets Staff
- @FXMarkets_
- 24 Apr 2006

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BACKGROUND

There is increasing demand to trade FX implied volatility as an asset class in its own right. Much of this demand comes from the fund management community looking for new sources of alpha. 'Trading FX implied volatility' (FX Week, March 20, 2006) looked at how to trade this asset class using delta-hedged at-the-money straddles.

PROBLEM

The previous article looked into how the frequency of hedging affected the correlation between the performance of the trade and the vol move. Initially

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