The volatility surface is a three-dimensional graph indicating mid-market implied volatilities and strikes for every given delta for a variety of tenors.
It is created for and used in the pricing of vanilla options.
SD volatility surfaces:
Are calculated using real-time market data. The implied volatility for each delta and strike is calculated using three pieces of data:
ATM volatility
25 Delta risk reversal
25 Delta butterfly
Are automatically updated using a real-time market data feed.
The model has been thoroughly tested against six years of market data, both for major currencies and emerging markets currencies.