Suppose the implied volatilities expressed in percent per annum of yen call options against the dollar with

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Suppose the implied volatilities expressed in percent per annum of yen call options against the dollar with maturities of one, two and three months are 9%, 10%, and 11%, respectively. If you thought that the market would soon price options to have a common volatility of 10%, what position would you take in the options to expect to profit from your beliefs?

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International Financial Management

ISBN: 978-1107111820

3rd edition

Authors: Geert Bekaert, Robert Hodrick

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