how do we resolve this seeming paradox? lets take GBPUSD now: it has a negative risk reversal, ie putvols > call vols , because traders expect spot to fall, so they are buying puts, pushing their vols up. and if the risk reversal becomes MORE negative , then based on the above, you'd say theres even MORE expectation of the spot falling. HOWEVER, if you actually go ahead and request a quote in the market for betting on the spot falling , eg a 3month european digital put (which are priced as leveraged put spreads, ie taking into account slope of vol smile), you'll see that when the RR becomes more negative (ie if you change your volsmile SLOPE to achieve this , without moving the atm), the digital price (which represents traders view on the probabilty of the payout occuring) goes DOWN , despite that we established above that traders think that change in RR means the prob goes UP!
also, perhaps a simpler way to look at this is , if you price an ATM digital put , you'd think it would be worth more than 50%, but it's less.
Now i understand WHY this occurs - i understand the maths here of digital pricing - but what i want to understand is how can one logically explain it, given my above explanation of what causes the vol skew slope.