sle
Registered: Apr 2003
Posts: 1609 |
07-28-12 12:37 AM
Quote from atticus:
It generally gets steeper (in index) as you approach expiration.
Actually, in root-time space the skew gets flatter. That is, if you are adjusting the slope by the square-root of time, it gets slightly flatter as it approaches maturity. This, of course, begs the question what is the best measure of skew and nobody could answer that (footnote 1) for a general case.
In addition, trading the skew is a tricky business, caveat emptor, but there are a lot of opportunities. I have like 6 models of the skew and some 10 different trading strategies that I do.
footnote 1. this question ranks right behind "how many pairs of shoes does a woman really need?"
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