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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?


To: Arik T.G. who wrote (9261)11/6/1997 1:29:00 PM
From: Defrocked  Read Replies (1) | Respond to of 94695
 
The volatility skew may be a modeling failure rather than
a market failure. Basic option models assume that
volatility is constant. By modeling volatility as another
stochastic term the "volatility smile" or "hockey stick"
can be reduced greatly and explained without assuming deep
OOM put buyers are irrational.( See Hull and White option textbook.)

Good luck to you.