The higher the exchange rate volatility:
A) both the higher the value of a put and the lower the value of a call
B) the lower the value of a call
C) both the higher the value of a put and the higher the value of a call
D) none of the given answers

Question

Quizplus · Accepted Answer

Higher exchange rate volatility increases the value of both put and call options because it implies a greater range of potential outcomes, making both types of options more valuable due to the increased chance of the option ending in the money.

The Higher the Exchange Rate Volatility