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

Question

Quizplus · Accepted Answer

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

What Does the Shape of the Volatility Smile Reveal About