Skew
Skew measures the relative richness of downside versus upside implied volatility, helping track hedging demand and asymmetry in market risk pricing.
Definition
Skew refers to skew measures the relative richness of downside versus upside implied volatility, helping track hedging demand and asymmetry in market risk pricing. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Options and futures embed views on vol, skew, and path that cash markets only hint at. When skew measures the relative richness of downside versus upside implied volatility, helping track hedging demand and asymmetry in market risk pricing shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what skew is saying. If skew measures the relative richness of downside versus upside implied volatility, helping track hedging demand and asymmetry in market risk pricing moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
State the expiry and Greek exposure; unmarked vol or pinning effects rewrite the thesis. Prefer a short written null hypothesis for Skew: what would falsify the current reading in the next window?