Put Skew
Put skew is a specific form of volatility skew where put options have higher implied volatilities than call options at the same strike distance from the money. It is very common in equity markets, as investors buy puts for downside protection.
This demand drives up the price of puts relative to calls. It provides valuable insight into market sentiment and risk preferences.
Glossary
Financial Contagion Modeling
Modeling ⎊ Financial contagion modeling involves simulating the potential spread of financial distress from one entity or protocol to others within an interconnected ecosystem.
Initial Exchange Offerings
Asset ⎊ Initial Exchange Offerings represent a novel mechanism for digital asset distribution, functioning as a primary offering directly on cryptocurrency exchanges rather than through traditional venture capital routes.
Risk-Neutral Valuation
Valuation ⎊ Risk-neutral valuation is a fundamental financial modeling technique used to determine the fair price of derivatives by assuming that all market participants are indifferent to risk.
Volatility Skew
Shape ⎊ The non-flat profile of implied volatility across different strike prices defines the skew, reflecting asymmetric expectations for price movements.
Expected Shortfall Calculation
Calculation ⎊ Expected Shortfall (ES) calculation is a quantitative risk metric used to estimate the potential loss of a portfolio during extreme market events.
Put-Call Parity
Relationship ⎊ : This fundamental theorem establishes an exact theoretical linkage between the price of a European call option, its corresponding put option, the underlying asset price, and the present value of the strike price.
Put Call Parity Relation
Principle ⎊ The put-call parity relation is a fundamental no-arbitrage principle in options pricing, establishing a theoretical relationship between the prices of European call and put options with the same strike price, expiration date, and underlying asset.
Bid-Ask Spread Analysis
Analysis ⎊ Bid-ask spread analysis is a fundamental component of market microstructure evaluation, quantifying the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask).
Order Flow Imbalance
Imbalance ⎊ Order flow imbalance refers to a disparity between the volume of buy orders and sell orders executed over a specific time interval.
Order Book Dynamics
Depth ⎊ This refers to the aggregated volume of resting limit orders at various price levels away from the mid-quote in the bid and ask sides.