We investigate whether bonds span the volatility risk in the U.S. Treasury market, as predicted by most 'affine' term …-frequency data. We find that the yield curve fails to span yield volatility, as the systematic volatility factors are largely …-diffusive models is incapable of accommodating the observed yield volatility dynamics. An important implication is that the bond …

We document that the implied volatility skew of S&P 500 index puts is non-decreasing in the disaster index and risk …-the-money puts, thereby steepening the implied volatility skew and resolving the puzzle. Consistent with the data, the model also …

the spot volatility extracted from the options and the one obtained nonparametrically from high-frequency data on the … underlying asset. We further construct new formal tests of the model fit for specific regions of the volatility surface and for … index options we extend the popular double-jump stochastic volatility model to allow for time-varying jump risk premia and a …

the %u2018volatility smirk%u2019 can be rationalized if the agent is endowed with Epstein-Zin preferences and if the … framework the stark regime change in the volatility smirk that has maintained since the 1987 market crash. To this end, we … jump. Note that such beliefs only update at crash dates, and hence can explain why the volatility smirk has not diminished …

uncertainty. The results dictate the role of uncertainty and volatility in structural models and we show they are consistent with …