Which of the following is true of a volatility smile?
A. Implied volatility is on the horizontal axis and strike price is on the vertical axis
B. Historical volatility is on the horizontal axis and strike price is on the vertical axis
C. Implied volatility is on the vertical axis and strike price is on the horizontal axis
D. Historical volatility is on the vertical axis and strike price is on the horizontal axis
C
A volatility smile shows implied volatility (which is on the vertical axis) as a function of the strike price (which is on the horizontal axis).
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