This paper provides a number of relevant guidelines to build a consistent Volatility Smile accounting for the FX market …

volatility jump diffusion model …

factors such as jump and volatility risks, short-sale constraints, and stock lottery characteristics. It is also inconsistent …

volatility risk. While pointing out the joint pricing kernel is not identified nonparametrically, we propose model-free estimates … of marginal pricing kernels of the market return and volatility conditional on the VIX. We find that the pricing kernel … present a U-shape. Hence, stochastic volatility is the key state variable responsible for the U-shape puzzle documented in the …

We investigate the effects of return jumps on option bid-ask spreads measured in implied volatility. To explain bid … shows that bid-ask volatility spread increases by 0.742% for a one-standard-deviation increase in our defined nonlinear jump … factor and by 0.247% for the factor of diffusion volatility. We obtain a R² value above 80%, and the jump risk factor is …

Option-implied moments, like implied volatility, contain useful information about an underlying asset's return …

Asymmetric volatility concerns the relation of returns to future expected volatility. Much is known from option prices … about the marginal risk-neutral distributions of S&P 500 returns and of relative changes in future expected volatility (VIX … on long-dated index options. We estimate the risk-neutral asymmetric volatility implied correlation and find it to be …

multiple volatility factors. We first propose nonparametric estimates of marginal pricing kernels, conditional on the VIX and …. In particular, conditioning on volatility factors, the pricing kernel of market returns exhibit a downward sloping shape … up to the extreme end of the right tail. Moreover, the volatility pricing kernel features a striking U-shape, implying …

This paper documents the fact that in options markets, the (percentage) implied volatility bid-ask spread increases at … risk in an incomplete market with both directional and volatility risk. We extend this model to multi-periods and show that … the same phenomenon occurs there as well. Two new implications are generated: a volatility level effect and a volatility …