Structural changes behind rise in long-dated skew, say dealers

market volatility
Volatility: a source of dealer losses

The European sovereign debt crisis caused a jolt in equity market volatility earlier this year, but dealers say structural market changes are to blame for the persistence of elevated levels of long-dated volatility and skew.

The shifts are a "regime change" for the equity derivatives market, say some bankers.

Market turmoil in May had a nasty knock-on effect on equity derivatives desks, with some measures of skew – which represents the difference in implied volatility between out-of-the-money

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