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A Volatility Smile Such as That Seen for Foreign Currency

Question 2

Multiple Choice

A volatility smile such as that seen for foreign currency options can be caused by: choose two)


A) The fact that currencies are traded in different countries at different times of the day
B) The fact that volatility is not constant
C) The fact that the activities of central banks cause occasional jumps in the exchange rate
D) The fact that interest rates may be different in the two countries

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