Hi,
is it normal that pricing a digital (fx) option with the volatility smile (sigma > sigma_ATM) gives significantly lower premium that pricing the very same option ATM? I would expect that higher volatility implies higher premium.
Thanks
is it normal that pricing a digital (fx) option with the volatility smile (sigma > sigma_ATM) gives significantly lower premium that pricing the very same option ATM? I would expect that higher volatility implies higher premium.
Thanks