The smiling curve and volatility smile
Large industries create established areas of human activity. The boundaries between areas lead to more friction and uncertainty.
These friction and uncertainty, more degrees of freedom need to be rewarded, therefore the value around the boundaries higher.
The value is lower inside the areas, because the inside firm is pressured and forced to tighter margins.
In the options volatility space, the volatility in the wings is also generally higher in order to price the uncertainty (of the extreme moves).
supply-demand of the uncertainty for BModels and... related to volatility smile in options