This paper proposes a novel way of pricing S&P500 index options in the presence of jump risk. Our analysis is built …'s certainty equivalent to specify agent's risk preference, which displays a fanning out characteristic. We find that the fanning … effect captures a remarkably large portion of the total market risk premium implicit in options. As a result, the model with …

functions show a region of risk proclivity that is reproduced by adopting the hypothesis of heterogeneous individual investors … ; pricing kernel ; behvioral finance , risl aversion ; risk proclivity ; Heston model …

regularities by developing a new firmbased trade model wherein managers are risk averse. Higher volatility induces the reallocation …