hi m, I think that dealer research is probably full of these considerations. So my question is if people remember some very relevant piecespublished here and there?For example I would cite a paper by Fei Zhou, Lehman, Volatility Skews, 2003, which certainly discusses some skew folklore.Gmike, right, so supply and demand on the micro level is an effect of the causes I am interested in. Also, can I ask you to elaborate a bit on what you explain and which sounds very interesting. Do you mean to say that skew is the future expectedlocal vol realized by the fwd? Can you restate that idea a bit more precisely? So imagine, you take the implied vol at some OTM strike today. What is that the weighted average over?As to low rate environement. Are you saying that skew is basically lognormal in such an evironement?Thanks for your comments guys, v. interesting.QuoteOriginally posted by: Gmike2000the skew is influenced by supply and demand on the micro level (the level of the mkt maker)from a macro perspective, however, the skew tends to follow the (probability weighted) local vol that the fwd realizes during the life of the option. for example in the current low rate environment, (normal) vol compresses as the fwd approaches zero (and vice versa). the skew reflects that behaviour, of course. if it didn't, there would be an opportunity for vol arb.