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Analysis Techniques & Strategies
| Name | Type | Default | Description |
| LeftSideLimit | Numeric | 60 | Maximum below the money volatility. |
| RightSideLimit | Numeric | 60 | Maximum above the money volatility. |
| PcntITM | Numeric | -10 | Below the money volatility this percent below the money. |
| VoltyITM | Numeric | 51 | User defined volatility below the money. |
| VoltyATM | Numeric | 25 | User defined volatility at the money. |
| PcntOTM | Numeric | 10 | Above the money volatility this percent above the money. |
| VoltyOTM | Numeric | 35 | User defined volatility above the money. |
The User Defined Linear Skew Volatility Model allows the user to specify a variable volatility input into the Pricing Model where the volatility changes according to how far above the money (in-the-money) or below the money (out-of-the-money) a particular option is. The volatility is specified by selecting points on a line where the x coordinate is the percentage above or below the money of an option and the y coordinate is volatility.
For example the user may input 20 for the at-the-money volatility (0, 20); for above the money volatility, he may specify 25 when above the money by 10 percent (10, 25); for below the money volatility, he may specify 15 when below the money by 20 percent (-20, 15).
These coordinates are then mapped and a line is drawn between them. Additionally, since the lines drawn will extend indefinitely to the left and right, upper-boundary limits are defined as well. In the previous example, our linear skew sloped upward towards positive infinity. The right hand limit applies a maximum value. If the slope towards negative infinity were positive, the left side limit would contain that value as well. For negative slopes, a limit of zero is
assumed.