coefficient of relative risk aversion, the discount rate, and the intensity of nonaddictive habit formation, which are validated … economy increases with relative risk aversion of the consumer and decreases as the habit formation intensity increases. The …-varying investment opportunity sets could explain the low risk-free rate and the relatively large variability of the market return over …

Hermite polynomials and test the model on S&P 500 index options. Restrictions on the prices of Hermite polynomial risk are … unrestricted four-parameter model results indicate skewness and excess kurtosis in the implied risk-neutral density. The skewness … of the risk-neutral density contrasts with the symmetry of the statistical density estimated using the Hermite model on …