We show that there are two distinct ways to make volatility stochastic that are differentiated by their consequences for skewness. Most models in the literature have adopted the relatively tractable methodology of using stochastic time changes to engineer stochastic volatility. Unfortunately,...

An argument for adjusting Black Scholes implied call deltas downwards for a gamma exposure in a left skewed market is presented. It is shown that when the objective for the hedge is the conservation of capital ignoring the gamma for the delta position is expensive. The gamma adjustment factor in...