average absolute difference between historical and implied volatility increases with stock illiquidity. This pattern … results show, however, that our results can be explained by the hedging costs of market makers who are net long in options on …

volatility process spends longer time in regime 2 than it stays in regime 1. The predicted call option prices from both models …

The stock options implied volatility skew reflects both the structural risk characteristics of the underlying company … default risk. The model can explain as much as 44\% of the cross-sectional variation in implied volatility skew and is …