In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …-form and structural models of stochastic volatility …

We document that implied volatility (IV) curves extracted from short-term equity options frequently become concave …. Firms with concave IV curves exhibit significantly higher absolute stock returns on EAD and higher realized volatility after …

return, such as volatility or skewness, and exploits her private information by trading a complete menu of options. The … exploit higher order moment information, such as the volatility straddle …

volatility and jumps instead of the Black-Scholes-Merton benchmark cuts by a quarter the amount lost by investors through …