Hi guys, I want to draw the DJX index implied volatility skew, I got the call and put prices for different strikes and use only the OTM options to calculate the implied vol which means using put for small strikes and call for larger strikes. but I found that the implied volatility skew always discontinuous at the transition surface. Who can help me to solve this problem? And anybody who knows how to generate the implied volatility skew from option price in the papers like "index volatility surface via moment-matching techniques"?Thanks.

How discontinuous is it? I am interested in the problem.

near the ATM, the implied vol calculated from put option is always lower than the implied vol from call. I weighted the two implied vol to make the skew smooth. but I am not sure how the implied volatility skew was obtained in many published papers.thanks~

Maybe you can employ the definition of SP500 to determine at-the-money strike: It might be because you are missing the correct strike, so the prices of calls and puts always differ.http://www.cboe.com/micro/skew/document ... alculation of S&P 500 forward price and determination of at-the-money strike:Similar to VIX, is calculated from at and out-of-the-money puts and calls. The atthe-money strike is defined as the listed strike immediately below the S&P 500forward price. To find the forward price, find the strike for which the differencebetween the midquotes of the call and put is at a minimum."By the way, would you mind to send me your worksheet to have a look... just curious...

"Then calculate the forward price asF = erT * (C ? P) +K, where T is the time to expiration, C and P are the call andput midquotes, and K is the strike at which minimum occurs."

exactly -- this is a FAQ and the VIX white paper is the solution.