Which of the following could cause the volatility smile typically seen for foreign currency options?
A. Currencies are traded in different countries at different times of the day
B. Currencies tend to have low volatilities
C. The activities of central banks causes occasional jumps in the exchange rate
D. Interest rates may be different in the two countries
C
The possibility of jumps in the exchange rate makes extreme exchange rates more likely and is consistent with the volatility smile that is observed.
You might also like to view...
Which company is most likely going to use a continuous campaign schedule of advertising?
A) a lawn mower manufacturer B) a Christmas decoration supplier C) a furniture manufacturer D) a space heater manufacturer
Describe and discuss embedded instructions
Answer the following statements true (T) or false (F)
1. Strategic plans detail how the operational plan will be achieved. 2. Strategic planning is focused on the day-to-day operations of the nonprofit. 3. Strategic management is an integrated approach that links strategy to implementation 4. The SWOT exercise is used to identify an organization’s strengths, weaknesses, opposition, and trends. 5. The mission statement explains the reason an organization exists.
A target segment should only be selected on the basis of their sales and profit potential
Indicate whether the statement is true or false