Implied Correlation And SKEW
Callum Thomas | Oct 19, 2017 12:35AM ET
We hear a lot about the growing list of bearish signals we've seen lately.
The implied correlation index often falls to a short-term extreme low around a market top, and spikes during a sell-off or correction. This makes sense as correlations often converge towards 1 in a market panic.
The SKEW index has been on an uptrend, reflecting rising demand for tail risk hedging as the market heads higher, with spikes reflecting the swings in investor sentiment.
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