Since this is a significantly better price, the portfolio manager decides to investigate further by clicking on the 7.29% volatility to access a dropdown that displays the CME instruments most closely responsible for generating this data point. The portfolio manager decides to access the CME Group FX Options Vol Converter, selects the main surface view, selects the “Ask” market view to see the offer side of the market, and finds the EUR/USD 2W 35 delta put bucket, which indicates an implied volatility price of 7.29%. The portfolio manager checks a couple of relationship pricing sources and gets implied volatility quotes of 7.65% and 7.70% on the offer. He or she decides to look at the pricing available on CME, as it would also be preferred from a best-execution standpoint to trade on a central order book and may be able to work the order to achieve a better fill. While he or she has access to CME quotes on their trading system, it would be more useful and efficient to have a quick reference price in OTC-equivalent terms ‒ rather than try to convert the CME premium quotes to volatilities and make all the appropriate adjustments in deltas to properly compare with the OTC prices. For example, a portfolio manager at a US-based asset management firm is interested in hedging a French security investment maturing in two weeks with a 35 delta European put.

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