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1answer
73 views

Why are short expiries associated with more pronounced volatility skews?

I've noticed that for a given strike price, the shorter expiration dates of options have more pronounced volatilities why is that?
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0answers
49 views

Modeling the Option Volatility Skew

The volatility skew often changes based on multiple factors, such as moneyness of the option, time to expiration, movement in the underlying instrument, etc.. How does one best model the skew? Is ...
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0answers
80 views

Question on Barrier Option and Skew

If you bought an Equity Call Option with a Down-and-In Barrier, are you Long Skew or Short Skew? Please provide explanation as well. Thanks.
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0answers
239 views

Interpolate option volatility in delta space in R

I have a bunch of deltas and option implied vols at those deltas. I would like to interpolate them in R. Interpolating them in delta space seems difficult, since normally you would like the ATM calls ...
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1answer
1k views

Skewness and Kurtosis under aggregation

Returns possess non-zero skewness and excess kurtosis. If these assets are temporally aggregated both will disappear due to the law of large numbers. To be exact, if we assume IID returns skewness ...
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1answer
342 views

Why does Skew measure remain more-or-less constant for Listed Expiries?

I have looked at the Variance Swap Papers published by GS-VarSwap and JPM-VarSWap where they talk about approximation to VarSwap strike using ATMF vol and Skew (slope of the volatility skew for 90-110 ...
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5answers
4k views

What is the implied volatility skew?

I often hear people talking about the skew of the volatility surface, model, etc... but it appears to me that a clear standard definition is not unanimously in place among practitioners. So here is ...
8
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1answer
363 views

Option Portfolio Risk - Volatility/Skew - practical implementation

I'm trying to improve my methods for calculating real-time US Equity option portfolio risk. My main problem is volatility "stability" across all strikes in an option series. The current ...
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1answer
934 views

How should I estimate the implied volatility skew term when calculating the skew-adjusted delta?

I'm trying to come up with the implied volatility skew adjusted delta for SPY options. I'm working with the following formula: Skew Adjusted Delta = Black Scholes Delta + Vega * Vol Skew Slope. I ...
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1answer
890 views

Is there a popular curve fitting formula of options skew vs strike price or vs Delta?

I was trying to build a options trading/optimization system. But it often gets more inaccurate as it scans through the far from ATM options because, you know, options skews. That is because I did ...