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Implied Volatility Skew Plot (Vol versus Moneyness)

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This a plot of the implied volatility of the option versus the simple moneyness of the option.

The Y axis is the implied volatility from either the Black, BaroneAdesi or Bachelier model.

The X axis is defined as simple moneyness, strike / underlying price.

The curves are simple function which assume a smooth continuous relationship between implied volatility and moneyness. Not all curve types are estimatable for all markets and over all periods. Each curve type has different requirements in terms of smoothness of option prices and number of active strikes.

There are a lot of listed skews, sometimes there is no trade or only one strike is active. You may see and empty plot because of this.

In comparing simple vol by strike (moneyness) with a curve, the curve is shown as a smooth line, while the dots indicate vol by moneyness.

Whenever possible, the skews are estimated under different assumptions for day counts and model types

There are currently two calenders; Business and Actual. We use assumptions similar to the CME for day counts.

There is currently no mechanism to adjust the European curves (Rapeseed on EuroNExt-for example) for US time. A European date is typically temporally older than the same US date.