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 …

bond returns, while neither, like implied volatility, predicts put returns. These opposite predictability results are … consistent with a stochastic volatility, stochastic jump intensity model, as put premia increase in volatility but decrease in …

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

.i.d. process. Below, however, we use the insight of Bansal and Yaron (2004) to demonstrate that the 'volatility smirk' can be … investigated) is whether one can explain within a standard preference framework the stark regime change in the volatility smirk … hence can explain why the volatility smirk has not diminished over the last eighteen years. We find that the model can …