hi allI would like to revive this thread.. kwchu's explanation makes sense, any thoughts?

It could be because of all the reasons below. supply-demand is related to a change in the markets expectation of the stock's long term "mean". during the dot-com bubble most tech stocks had an inverted skew. common people were levered up by selling puts and buying calls!

upon further thought, although the strategy is negatively convex wrt to vol, one pays money to get into it... so, I don't know what does one retain for being short vovunlike, selling gamma where one gets paid theta...

First;y, I don't know the specifics of the asset, but know something about convexity...How are you assigning weights to the individual CDOs?

thanks... I was looking for the original paper...

In my opinion one can do this by buying the atm straddle and selling the strangle... you d(vega)/d(vol) profile is then negatively convex making you short vovit's the same as being short straddle in the vol option market

Thanks to bothbut, how do you deal with the z/x(z) term which goes to zero/zero form... does it go to 1 in the limit?also, I compared the black vol formula under the normal model with the black vol under sabr (with vov=beta=0), and they look a bit different... is there an approximation?

More specifically, in the formula, sigma(K,f)= alpha/(fK)^( (1-beta)/2) * (z/x(z))....if I just substitute beta=0, rho=0, vov=0 is the resulting vol the same as the one I would have got under a normal model?

HiIn a calibrated SABR model, if I make beta, rho, and vov all Zero... I should be left with a normal model?And if I make beta=1, rho=vov=0, the resulting should be just logonormal model?Are these true?Thanks a lot

Any ideas?

It is possible to back out the IV for any time period express in years... even if it's in hours... the numbers don't make a lot of sense but it's possible

HiIn a calibrated SABR model, if I make beta, rho, and vov all Zero... I should be left with a normal model?And if I make beta=1, rho=vov=0, the resulting should be just logonormal model?Are these true?Thanks a lot

HiI am looking for the original paper on the CEV model. If someone can post it, or send me a link for it, I'll highly appreciate it...thanks

I AM TALKING ABOUT THIS:www.predict.com

does anybody how is the prediction company doing these days ? do their models make money for UBS ? just curious....