Question: A trader wants to use the volatility implied from an at-the-money call option on a foreign currency to price other call options on the same
A trader wants to use the volatility implied from an at-the-money call option on a foreign currency to price other call options on the same currency. Given the volatility smile for foreign currency options, which of the following would be true? O Deep out-of-the-money call prices would be too low and deep in-the-money call prices would be too high Deep out-of-the-money call prices would be too high and deep in-the-money call prices would be too low O Both deep out-of-the money and deep in-the-money call prices would be too high Both deep out-of-the money and deep in the money call prices would be too low
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