I'm reading this paper by Fengler (2005) and have came across the below snippet.
context: Implied volatiltiy surface plot has 3 dimensions IV, Strike, Time to Maturity. Author replaced Strike with Moneyness metric.
My questions are:
- why replace strike price with forward moneyness
- what is log forward moneyness or some metric of moneyness?
- For two calls with different maturities, what does "both calls have same forward-moneyness" means. Please refer page 11, proposition 2.1 for this question. I couldn't post the snippet, since i am new to this forum and have less reputations. Apologies.
Thank you in advance. Loving this community. :)