__Skew vs. Implied Volatility__: Normally, a strong relationship is seen between implied volatility and volatility skew (especially skew based on sigma). Hence a scatter plot of current skews and IVOLs of indices / single names will reveal indices / singles that are way off from the relationship and risk reversal trades can be put work on the outliers

__Skew vs. Open Interest (OI)__: While skew is the premium paid by an investor / trader for his negative sentiment, the OI Put Call Ratio (OI PCR) measures the negative sentiment from open interest perspective; a parallel can be drawn between premium and price, and similarly between OI and volume. We know that in any asset market if increase in the price of the asset is not accompanied by rise in volume then the price increase won’t sustain for long. In similar vein if rise in skew is not accompanied by rise in OI PCR then the skew can be expected to drop. Hence whenever there is a divergence between skew and OI PCR then a trade (short / long strangle) can be put to work. For instance termstructures of skews and OI PCR can be plotted and if for certain maturity the skew is relatively higher than OI PCR then straddle / strangle of that maturity can be sold

__Sectoral Volatility Premium (SVP)__: It is nothing but the spread between implied volatility of a sector index and that of the broader market index, for instance the implied volatility spread of XLV (pharmaceutical ETF) and SPY (S&P 500 ETF). This SVP can be used trade sectoral volatility across regions. For instance the US and Europe markets are almost similar and after looking at the historical relationship between pharmaceutical SVPs of US and EU a volatility spread can traded if any divergence exists. Similar spread trades are also possible between related industries like Semi-conductor vs. InfoTech, Oil refiners vs. Oil rig companies and so on. By trading SVP, the broader market risk and company specific risks are hedged off. SVP can also be used to trade sector rotation

Above techniques are within the ambit of the volatility market; following techniques are relative valuations across markets.

__Earnings Yield Premium vs. Implied Volatility__: This technique compares values between volatility and equity markets. The expected return / risk premium for an equity is calculated using CAPM though this model is useless for an index. Hence for sake of simplicity in the case of single names and for lack of any model for index the inverse of PE ratio would be used as expected yield of the equity/index. The implied volatility measures the risk of the asset and hence to make an apple to apple comparison the earnings yield is adjusted for the government bond yield to get the risk premium which is another measure of risk of the asset. Since implied volatility and earnings yield premium both measure riskiness of the equity / index and it is seen that strong relationship exists between these two. Hence EYP and IVOL can be used for relative valuation between equity and volatility market

__Credit Default Spread vs. IVOL__: This is based on the idea propounded by Merton which gained wide popularity especially during the subprime crisis. During the crisis option traders who found options trading at extreme quotes preferred CDS to hedge their portfolios. While the relationship between EYP and IVOL is straight forward as the underlying asset is equity (though tenures differ), the same can’t be said about CDS vs. IVOL. In this case Miller & Modigliani have certain say. Though strong relationship is seen between IVOL and CDS for low rated companies, especially junk rated companies, the relationship is weak for strong companies (highly rated companies). So balance sheet plays an important role in the relationship, weak balance sheet strengthens the relationship between CDS and IVOl, and vice versa. Another factor that weakens the relationship between CDS and IVOL is again the tenure.