Empirical findings suggest two violations of the Black-Scholes model: the volatility smile and the asymmetrical distribution for underlying asset returns．Although stochastic volatility models based on the no-ar_x005fbitrage theorem can explain these two phenomena，the alternative pricing method under general equilibrium framework has been seldom studied． The traditional equilibrium model incorporating the expected utility fails to differentiate the investor’s different risk preferences towards the diffusive uncertainty and the jump risk． However，with the fanning preference，the model is able to capture an additional risk premium，and generates a pronounced volatility smile． On the other hand，adopting the fanning effect results in a leptokurtic and leftskewed distribution．