volatility - Quanto derivatives and FX risk management ... Let us assume that we have a foreign asset with volatility $\sigma_{ASSET}$. Now, I know that when pricing this under the foreign measure, I need to do a drift adjustment, namely \$\sigma_{ASSET NEW Foreign Exchange Implied Volatility Surface adjustment due to change of numeraire is etc. Since FX volatility smiles are commonly quoted as a function of delta rather than as a function of strike, it is important to use a delta definition consistent with the market convention for the currency. 3.1.1. Pips Spot Delta