Skewing Quanto with Simplicity

TL;DR

This paper introduces a simple, efficient analytical method for solving the Quanto Skew problem in equities, accommodating both equity and FX volatility skew, with benefits of ease of implementation and fast performance.

Contribution

The paper presents a novel analytical approach that simplifies and accelerates solving the Quanto Skew problem, integrating equity and FX volatility skews.

Findings

Method is highly efficient and easy to implement.

Achieves fast performance in practical applications.

Handles both equity and FX volatility skew simultaneously.

Abstract

We present a simple and highly efficient analytical method for solving the Quanto Skew problem in Equities under a framework that accommodates both Equity and FX volatility skew consistently. Ease of implementation and extremely fast performance of this new approach should benefit a wide spectrum of market participants.