Journal
JOURNAL OF DERIVATIVES
Volume 18, Issue 4, Pages 9-25Publisher
INST INVESTOR INC
DOI: 10.3905/jod.2011.18.4.009
Keywords
-
Categories
Ask authors/readers for more resources
This article provides theoretical guidance and empirical analysis aimed at differentiating among implied volatility skew measures. Industry analysts and academics use a variety of measures, but most have little formal justification. The author finds that most commonly used skew measures are difficult to interpret without controlling for the levels of both volatility and kurtosis. Many ad hoc measures fail to meet the conditions for a valid skewness ordering. The author's preferred measure is the (25 delta put volatility-25 delta call volatility)/50 delta volatility; among the measures considered, it is the most descriptive and least redundant.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available