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Robust trading of implied skew. (English) Zbl 1422.91717
This paper achieves the explicit construction of a portfolio of European call options such that the sign of its price is a function of the implied skewness, i.e., the ratio of the implied volatility of out-of-the-money (OTM) call to that of OTM put. This result holds regardless of the underlying mathematical model and may produce some practical applications to specific pricing models. The declared purpose is in fact that of combining the so-called robust approach to finance with model specific insights.

MSC:
 91G20 Derivative securities (option pricing, hedging, etc.) 91G10 Portfolio theory
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References:
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