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List:       r-sig-finance
Subject:    Re: [R-SIG-Finance] How to interpret this formula?
From:       BBands <bbands () gmail ! com>
Date:       2013-10-13 0:14:05
Message-ID: CAGS5yBWezkgkWxuDYDBBV_pCaAuJ2Hy+YqY+1=7_iBOsQ2=j7w () mail ! gmail ! com
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I originally saw it this way,
    Actual/strike -1
which is the % in the money.

I modified that to:
if actual >= strike then
    actual/strike -1
else
    strike/actual - 1
endif

>From a trading perspective that makes sense as it gives you the
correct reversible round-trip distance, which is quite useful, but
skewness it ain't.

Best,

     John

On Sat, Oct 12, 2013 at 12:53 PM, Arun Kumar Saha
<arun25558038@gmail.com> wrote:
> Hi,
>
> I have come across a formula to calculate the Option implied skewness which
> is calculated as (Strike/underlying's price - 1)
>
> Has anyone come across a similar type of formula?
>
> Can somebody please explain how can I derive that? Any online
> reference/paper is highly appreciated.

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