How to interpret this formula?
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 at 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.