SVI 402 · Tier 400 — Graduate — Specialization & Capstone · 3 credits
Skew Dynamics & Higher-Moment Trading
Risk reversals, butterflies, the crash-o-meter, split-surface analytics, and the moment dynamics that warn before a move.
Prerequisites
Learning Objectives
- Construct the delta-strike risk reversal and butterfly from a quoted volatility smile and state what each one measures.
- Read the put-skew slope as the market's price of left-tail insurance and explain why a steep slope encodes crash-o-phobia rather than realized risk.
- Decompose an implied-volatility surface into its call-side and put-side components and read the spread between them as a directional signal.
- Compute a rolling time-series of the third and fourth standardized moments from a return window and read it as an evolving signal rather than a single snapshot.
- Derive the risk-neutral density from a call-price curve via the Breeden–Litzenberger relation and state the no-arbitrage condition that keeps it non-negative.