What does the shape of the volatility smile reveal about call options on a currency? A....
What does the shape of the volatility smile reveal about call options on a currency?
A. Options close-to-the-money have the lowest implied volatility
B. Options deep-in-the-money have a relatively high implied volatility
C. Options deep-out-of-the-money have a relatively high implied volatility
D. All of the above
Homework Answers
Ans: Optoin D All of the above.
Volatality smile is U shaped which are relatively high at out of the money and in the money. lowest at to the money. Therefore options a, b, c satisfies volatality smile graph.
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What does the shape of the volatility smile reveal about
call options on a currency?
A....
Assume all rates are per annum continuously compounded Consider the following three European call options, all...
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