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Hi,If i know the implied volatilty of a strike, would it be posible for me to calculate the other strike volatilities?for example : if i know that actual volatility of a strike lets say 100 is 0.35. Is there any way i could calculate the implied volatilities of strike 110, 120, 130 without actually knowing the option pricesthanks

depends on your assumptions and modelI suggest you take a look at the thread "Stochastic Volatility Models"it will give you some insight

In a similar line, if I know implied vol of the index, can I establish a relationship between impliedVar(stock)=alpha+beta*impliedVar(index)?How about VolSkew(stock)=alpha+beta*VolSkew(index)?What kind of problems can we run into?

Dear Reza,On Vol swap thread you mentioned a paper by Canadian professors(I cannot find the post). How is their approach different from yours or is that an empirical verification of yours.Thanks.

hi,it is not differentthey use the same method applied to a different set of data

hey orangeman,If ind very interesting the attempt to link theoretically the skew index and the skew of the security...the questionis to think about a relation between the skew of a given portfolio (say the CAC) and the skew of its componenents? Are there many studies on this, im not sure!

The current wisdom on the CBOE is the following:The index (say SP500) shows a declining smirk (a declining skew if you want) The individual stocks have higher implied vol with a smile pattern (larger on the extremes)

ok newn2 ! do you have any explanations?

If the index rise the ATM volatility will go down, so I will be willing to sell OTM calls delta neutral. About the single stocks,..... there is still a way to cheat the customers

QuoteOriginally posted by: mencey . . . About the single stocks,..... there is still a way to cheat the customers Huh? why would individual stock options be a "cheat the customer" proposition vs index options?

because the diferences in the call curvature (at least in the european markets)