What is the intrinsic value of a foreign currency option?
A) The difference between the spot rate and the strike price
B) The gain that could be realized if the option was exercised immediately
C) The chance that a currency will rise over time to make the option in the money
D) The difference between a call option and a put option

Question

Quizplus · Accepted Answer

The intrinsic value of a foreign currency option (or any option) is the gain that could be realized if the option was exercised immediately. This is essentially the profit that could be obtained from exercising the option at the current market conditions, ignoring any premium paid for the option itself.

What Is the Intrinsic Value of a Foreign Currency Option