Hi Folks,Hope all is well.Interested to hear different views/opinions/sources which attempt to explain the term-structure of implieds in equities. There is a reasonable explanation of skew, i.e. leverage, but I haven't seen one for term-structure.It wouldn't be surprising if there was one description for short dated term (say 1m-6m, and another for 6m-5y).Also, it would be interesting to hear something different for single-stocks and index vol.Thanks

The current thinking, which is not fully accepted by oldskool academics, is that negative volatility slope is not due to leverage - at best it explains something like 20% of the skew.Also, the volatility curves for stock index and single stocks are different - the index is more or less a regular monotonously declining slope, while for a stock it is more like an actual symmetrical volatility smile like we have in currencies. This actually makes a lot of sense, since a single stock can jump both up or down given a shock. The index is a portfolio of all the stocks, so idiosyncratic shock is not an issue there. Therefore the index vol curve arises from market inefficiencies and stochastic and pricedependent volatility.Interesting point of view is definitely trying to link the mean reversion/aversion at different time frames to the volatility time structure. Short-term mean aversion (momentum) naturally leads to exploding vols, while the longer-term mean reversion leads to mean-reverting volatilities.

Hi Huopainen,Thanks. However, I gather you are really talking about the volatility smile/skew across strikes, and not the evolution of implieds along the maturity axis in your comments below. My question is really about the latter, i.e. what potentially explains the slope of implieds, be it by strike or delta/moneyness, along the maturity axis.That having been said, agreeably leverage is only one of the explanations for volatility smiles/skews in equities. But that is not the point with the question.Thanks anyways

Well, I did mention about the term structure towards the end.I just wanted to make some points regarding skew/smile first clear, since the term struct is linked to it. short term vol higher than long-term - because of jump risk, pin risk, realized volatility is mean revertingThese are just some factors - it is not unusual to see the vol curve inverted i.e. higher for longer maturities, but the basic slope is positive, like in interest rates.Besides, if leverage = true: u would expect to see higher neg. corr. of price and vol for highly leveraged companies, right? In fact, this is not the case, so leverage effect is not true.