Something Missing?

Don FishbackUncategorizedLeave a Comment

If you’re into probability — that would be anyone who has ODDS in their name like I do — this is a thought-provoking chart from a Bloomberg article this morning. I’ve created charts similar to this in the past using my trusty spreadsheets.

What they’ve done that is different from the normal bell curve is that instead of using the at-the-money implied volatility across the horizontal x-axis, where the basic assumption is that volatility is constant, they use the implied volatility at each strike price.

It’s pretty interesting, and it’s something that I’ve done internally for decades. So it’s kind of fun to finally see it in the public sphere.

But there is something missing, and it’s not insignificant.

Can you tell? It’s not as complicated as you might think. So it’s not a trick answer.

Let us know what you think is the critical piece of information the chart and the quote from the article have left out. You can do that by responding in our ODDS Community.