Consider equation (1): SKEW,' = IVOTM put-IV TM all t,i ti ti IV,iOTM put = implied volatility of OTM put for stock i on day t and IV.iATM call-implied volatility of ATM call for stock i on day t. where Let K= strike price and S= share price. For the purpose of this question, we define a put option as OTM if KIS is equal or close to 0.95, and we define a call option as ATM if KIS is equal or close to 1.00. Note that one can use IV,.ATM put instead of IVi ATM call as the second term in the right hand side of equation (1), but the convention is to use IV..ATM cll because it is more liquid than its ATM put counterpart. i. In your own words, explain (in no more than 5 sentences) what SKEW, measures. Hint: Look at equation (1) again. When do you expect to see a large positive SKEW..? If SKEW,-0.2 (or 20%), what does it mean? On the other hand, if SKEW 0.01 (or 196), what does it mean?]