How Is the Fair Value of a Foreign Currency Option

question 40

Multiple Choice

How is the fair value of a foreign currency option calculated?

• A) By using the Box-Jenkins technique
• B) Using the modified Black-Scholes pricing model
• C) Through an arms-length transaction
• D) Using quotes given daily in the Wall Street Journal

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Definitions:

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without any need for learning.

Vicarious Response

A reaction experienced in response to observing another person's experiences or emotions.

Learning

The acquisition of knowledge, skills, values, or behaviors through study, experience, or teaching.

Permanent Change

A lasting alteration in behavior, situation, or environment that does not revert back to its original state.