Sizing up skew

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Any serious structured products house will be exposed to skew. These days, most banks are content to hedge this risk using vanilla strategies. However, a small faction of equity derivatives players believe there is a better way to cope with skew exposure. They argue that products purpose-built to pass skew to investors will give banks a more accurate hedge. Others contend these new products do not serve to repackage any risk per se, but are simply another financial instrument.

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