Estimating Overnight FX Implied Volatility and Breakeven Moves

Summary

The document asks how to obtain implied volatility for a specific overnight period in foreign exchange, such as the night before a particular trading day. It then asks how to translate an overnight volatility quote into an implied breakeven exchange-rate move, using USD/JPY as an illustrative case and giving a forward reference level and volatility assumption.

The topic connects option-implied volatility with the expected scale of price movement over a defined horizon. A usable calculation would need to clarify the volatility quote convention, the precise expiry and day-count basis, and what probability or confidence level the requested breakeven represents. The post does not provide a source, formula, derivation, or answer, and the example alone is insufficient to determine a unique breakeven. It is therefore a request for guidance on the calculation rather than evidence for a particular estimate.

Key ideas

• The post seeks implied volatility for a specific overnight FX expiry.
• It asks how to translate that volatility into an exchange-rate breakeven move.
• The calculation depends on the volatility convention and the exact period being measured.
• The document provides no formula or answer, and does not define the probability level for breakeven.

Tags

# how to derive overnight FX implied vol and how to translate into implied breakeven


# how to derive overnight FX implied vol and how to translate into implied breakeven












is there a good link or explanation how to get a specific day (next month's 1st trading day, etc) overnight implied vol? (pls guide where should i start with?) and let say USDJPY (say forward ref is 135), overnight vol is 40%, how can i get the implied breakeven? thanks.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.