Interpreting Delta-Quoted Implied Volatility for CDX Options

Summary

The note explains that delta 10 or delta 30 implied volatility quotes identify points on an options volatility surface, rather than a different definition of option delta. Each delta quote maps to a particular strike or moneyness under the relevant market conventions, much as in foreign exchange options.

It points to market data displays for viewing CDX option volatility by delta or moneyness. The explanation is brief and does not define the precise delta convention, quote units, or conversion method; those depend on the market and instrument conventions. It also offers no worked example, pricing formula, or empirical evidence, so readers should consult the applicable CDS option conventions when interpreting a specific quote.

Key ideas

• A delta label on an implied volatility quote identifies a point on the volatility surface.
• Each delta corresponds to a strike or moneyness under the market’s conventions.
• The mapping between delta and moneyness can vary with conventions.
• CDX option volatility surfaces may be displayed by delta or moneyness.

Tags

# implied vol by Delta


# implied vol by Delta












I am looking at some data that is Delta 10, Delta 30, etc for an index option CDX IG. I know the meaning of Delta, as a sensitivity of the price move with respect $1 move in the underlying index. What does 10%, 30% mean in this case? Is that some subcase of the Delta I know?

## Answer by AKdemy (score 1, accepted)

https://quant.stackexchange.com/a/69573

That is identical to how FX IVOL is quoted. See for example this question or look at an illustration showing how FX options are quoted in delta. Uwe Wystup and Dimitri Reswich explains this nicely.

I am not too familiar with CDS options, but if you have Bloomberg, you can look at CDSO. Each delta corresponds to a specific strike / moneyness. The vol surface can be found on OMON for CDX's. CDX IG 5Y Corp >> OMON - Vol surface for example. If you display it in moneyness, or delta is usually a bit dependent on markets and conventions. In your case it seem you have IVOL quotes in terms of delta.

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