The greater the variability of a currency, the ____ will be the premium of a call option on this currency, and the ____ will be the premium of a put option on this currency, other things being equal.
A) greater; lower
B) greater; greater
C) lower; greater
D) lower; lower

Question

​The greater the variability of a currency, the ____ will be the premium of a call option on this currency, and the ____ will be the premium of a put option on this currency, other things being equal.
A) ​greater; lower
B) ​greater; greater
C) ​lower; greater
D) ​lower; lower

Quizplus · Accepted Answer

The greater the variability (or volatility) of a currency, the higher the premium for both call and put options. This is because higher volatility increases the probability of the option ending in the money, thus increasing its value.

​The Greater the Variability of a Currency, the ____ Will

The Greater the Variability of a Currency, the ____ Will