10. Why do traders use volatility smiles for pricing options? A. To allow for non-lognormality of the probability distribution of future asset price B. Because it is consistent with recent market moves C. As a tool to reflect their views about extreme market moves D. Because extreme market moves are always more likely than Black-Scholes-Merton assumes What does the shape of the volatility smile reveal about put options on equity? A. Options close-to-the-money have the lowest implied volatility B. Options deep-in-the-money have a relatively high implied volatility C. Options deep-outofthernoney have a relatively high implied volatility D. All of the above What does the shape of the volatility smile reveal about call options on a currency? Options close-to-the-money have the lowest implied volatility Options deep-in-the-money have a relatively high implied volatility Options deep-out-of-the-rnoney have a relatively high implied volatility All of the above pops Which of the following is NOT true? A. A volatility surface provides more information than a single volatility smile B. A volatility surface is used to determine the implied volatility of an option that does not trade actively C. A volatility surface can be determined from a single volatility smile using interpolation D A volatility surface incorporates information about options with different maturity dates