Question: IS THIS TRUE OR FALSE? with proof if you can. An investor is drawing the graph of implied volatility as a function of moneyness (wheremoneyness

IS THIS TRUE OR FALSE?

with proof if you can.

"An investor is drawing the graph of implied volatility as a function of moneyness (wheremoneyness is measured as strike price divided by todays stock price) for options on theexchange rate SEK/USD, using 3 months options with various strikes. According to theBlack-Scholes-Merton model the graph should, if markets are free of arbitrage, look like asmile with at-the-money options having low implied volatility and out-of the money andin-the-money options having high implied volatility"

Is this statement true or false?

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