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Glimpsing through literature, I read that volatilities in the equity market started to display a smile after the crash in 1987. But when did volatilities start to smile in capital markets?

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I imagine it was always there, that was just when it became apparent current models didn't account for it. – jeff m Dec 5 '13 at 15:28
@jeffm Of course you are right, so I am actually asking, when it stopped being neglictible. – user40989 Dec 9 '13 at 14:21
@user40989 can you clarify what you mean by capital markets, if you are excluding equity markets (as your question appears to)? – tfb Apr 19 '14 at 17:08

From the information I've gathered the volatility smile concept did not exist prior to 1987. Since then it can be seen in foreign exchange markets and various other investments. Equity derivatives show volatility pairs and the smile tends to seen quite easily here.

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I have read as much, but can anyone point me to a (commercial ?) source of US options data before 1990, so I see for myself? – onlyvix.blogspot.com Jun 5 at 14:11

I recall Rebanato in Volatility & Correlation mention early 90's in Yen denominated products and rapidly being adopted for the other majors. Sure there was money to be made doing these skew trades but markets in both volatility and the underlying were quite possibly truck wide.

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