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
D
D is correct. The volatility smile for currency options is U-shaped.
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