FX Implied Volatility

An implied volatility is the volatility implied by the market price of an option based on the Black Scholes option
pricing model. A volatility surface is derived from quoted volatilities that provides a way to interpolate an implied
volatility at any strike and maturity.

Unlike in other markets that quote volatility versus strike directly, the FX smile is given implicitly as a set of
restrictions implied by market instruments and as such a calibration procedure to construct a volatility delta or
volatility strike smile is used.