20 years: Equity derivatives trading
In this video, Imran explains an important concept in equity volatility trading known as SKEW. He further talks about the main reasons of it's existence in equity markets and how combining skew and term structure allows us to construct the 3D volatility surface. Finally, he introduces the concept of dynamic Greeks, which are often the consequence of a large skew position.
In this video, Imran explains an important concept in equity volatility trading known as SKEW. He further talks about the main reasons of it's existence in equity markets and how combining skew and term structure allows us to construct the 3D volatility surface. Finally, he introduces the concept of dynamic Greeks, which are often the consequence of a large skew position.
19 mins 4 secs
Skew essentially tells us how the market is pricing tail risk and which direction it expects the shocks to come, and even how likely they may be.
Key learning objectives:
Understand why skew exists in equity markets
Understand how combining skew and term structure allows us to construct the 3D volatility surface
Outline the causes of movements in the volatility surface
Define Dynamic Greeks