Which of the following is true about daily exchange rate moves?
A) Four standard deviation daily moves in an exchange rate happen less frequently than they would do if changes were normally distributed
B) Four standard deviation daily movements in an exchange rate happen more frequently than three standard deviation moves in the exchange rate
C) The frequency of six standard deviation daily movements in an exchange rate is about once every 100 years
D) None of the above

Question

Quizplus · Accepted Answer

A,B,and C are not true.Large daily exchange rate moves happen more frequently than they would if they were normally distributed.By definition a four standard deviation move occurs less frequently than a three standard deviation move.A six standard deviation move happens more frequency than once every 100 years.The table in the text suggests the probability is 3/10,000.Given that there are 250 business days in a day this is about once every 13 years.

Which of the Following Is True About Daily Exchange Rate