Which of the Following Is True as Time to Maturity

question 9

Multiple Choice

Which of the following is true as time to maturity increases?

• A) The volatility smile for currency options tends to become more pronounced
• B) The volatility smile for currency options tends to become less pronounced
• C) The volatility smile for currency options first becomes less pronounced and then becomes more pronounced
• D) The volatility smile for currency options remains approximately the same

---

Definitions:

Marginal Expenditure Curve

A graph that shows the additional cost incurred by acquiring one more unit of a good or service.

Monopsony

A market situation in which there is only one buyer for a product or service, giving that buyer substantial power over prices.

Rightward Shift

A movement to the right on a graph, indicating an increase in quantity supplied or demanded at a given price.

Subsidy

Payment reducing the buyer’s price below the seller’s price; i.e., a negative tax.