Which of the following factors would most likely affect foreign exchange option values?

In analyzing market option pricing dynamics, a risk manager evaluates option value changes throughout the entire trading day.

Which of the following factors would most likely affect foreign exchange option values?

I. Change in the value of the underlying

II. Change in the perception of future volatility

III. Change in interest rates

IV. Passage of time
A . I, II
B . I, II, III
C . II, III
D . I, II, III, IV

View Answer

Answer: D