One way to infer future currency volatility is to consider:
A)the spot rate of the currency since it incorporates all information known about the currency.
B)currency option prices since they estimate future currency volatility rather than report past currency volatility.
C)the history of the volatility of the currency since that suggests the future of the currency.
D)how currency volatility has affected the firm in the past.

Question

Quizplus · Accepted Answer

Currency option prices incorporate the expected future volatility of a currency, making them a useful tool in inferring future currency volatility. They reflect market sentiment and expectations, as opposed to historical data (C) or the current spot rate (A), which only reflect current market conditions. How currency volatility has affected a firm in the past (D) may provide useful information when making investment decisions, but it is not a reliable indicator of future currency volatility.

One Way to Infer Future Currency Volatility Is to Consider