Bid-Ask spread on currency quotation will be wider if the currency exhibits more volatility than others because of the country's higher uncertain economic conditions
Added by Esperanza J.
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This spread represents the cost of trading a currency and is typically wider for more volatile currencies. Show more…
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We have found that the implied volatility for the American option ANZDT8 is approximately 0.1597. If all the terms are the same except it was a European option, will the inferred volatility be the same, higher, or lower? Give your reasoning.
Akash M.
When the exchange rate between two currencies freely floats, the governments will deflate their currency to increase exports. The balance of payments will always favor current accounts. The exchange rate equalizes the quantity demanded and quantity supplied of each currency. The demand curves for the currencies will slope upward. The sum of the current account and the capital and financial account will be one.
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