Anticipated Events’ Impact on FX Options’ Implied Volatility

Abstract: Understanding events’ impact on financial instruments are crucial for the participants in the financial markets. Here we propose an approach to model an anticipated event’s impact on the prices of FX options, represented in implied volatility. The model is implemented for anticipated event’s with both Black and Scholes and SABR as the assumed underlying dynamic. The model generates an implied volatility frown, for both dynamics. Hence it contributes to the area regarding concave implied volatility functions, which at the time of writing has little published literature related to it.