Posts tagged 'skew'

Shamu in the swimming pool

Hedge funds are not happy.

Don’t everyone run to their defence at once now. Read more

More smiles with ETF options

Here’s an interesting observation from a new paper published by the International Journal of Business and Finance (and flagged up by the CXO Advisory Group).

It pertains to the pricing of ETF options, which it turns out are not a like-for-like substitute for index options in the underlying indices they track. Even though you might think they should be. Read more

Goldman ponders ‘puzzling’ dollar skew

The dollar may be dropping in the spot market, but in options world… it’s still going strong.

The option market skew in dollar crosses — the difference between the implied volatility of out-of-the-money dollar-related puts and calls – remains bid towards dollar appreciation. And Goldman Sachs figures that the “puzzling” dollar skew can be explained by cross asset hedging, in a piece of research out on Wednesday. Read more

Skewed – the CBOE’s new fear indicator

The Chicago Board Options Exchange has just launched a new ‘fear factor’ index to sit alongside the now-famous Vix. Meet the Six, or the CBOE S&P 500 Skew Index.

The ‘SKEW’ is an option-based indicator that measures the perceived tail risk of the distribution of S&P 500 returns at a 30-day horizon. Basically it’s meant to measure what the equity options market thinks about the risk of a black swan event. Read more

Bernanke’s genie released

The Bernanke put — a.ka. that almost magical and metaphysical QE2 effect — appears to be having an impact on equity options skew already.

Simply explained: skew is what happens when the price of calls does not equal the price of puts exactly. That is to say when out out-of-the-money calls cost more or less than the equivalent puts. Read more

Dylan Grice vs Emerging Markets

Société Générale strategist Dylan Grice is back on the Rudolf von Havenstein trail.

Grice first brought up von Havenstein back in March, noting the Prussian central banker’s penchant for monetising Germany’s debt during the First World War — leading to massive bouts of hyperinflation. Also of note, according to Grice, was von Havenstein’s striking resemblance to one Fed chairman, Ben Bernanke. Read more

Goldman’s Q2 really was ‘exciting with risks’

Does anyone remember Goldman Sachs’ 2010 Outlook?

The bank’s year-ahead piece, which carried the title “The Outlook for 2010/11: Exciting, with risks!”, is being given a second life after its December 2009 publication. But not in a good way. Read more