Erratum for: Smile dynamics -- a theory of the implied leverage effect

TL;DR

This paper corrects previous findings on the implied leverage effect, showing it varies with maturity and differs between single stocks and OEX options, with revised conclusions aligning theory and data.

Contribution

It provides a corrected analysis of the implied leverage effect, clarifying its behavior across different maturities and option types.

Findings

Underestimation of implied leverage for short maturities in stocks

Overestimation of implied leverage for long maturities in stocks

Overestimation of implied leverage in OEX options except at shortest maturities

Abstract

We correct a mistake in the published version of our paper. Our new conclusion is that the "implied leverage effect" for single stocks is underestimated by option markets for short maturities and overestimated for long maturities, while it is always overestimated for OEX options, except for the shortest maturities where the revised theory and data match perfectly.