Volatilities are the only judgmental aspect of currency option pricing and are therefore, the least important component therein.

Question

Quizplus · Accepted Answer

Volatilities are not the only judgmental aspect of currency option pricing, but they are a crucial component. Other important components include the strike price, the spot price of the underlying currency, the time to expiration, and the risk-free interest rate.

Volatilities Are the Only Judgmental Aspect of Currency Option Pricing