I'm Just Doing What I'm Told, Sir.

[Grand Magus]

An employee was recently assigned to the foreign currency desk at his bank and was told by smarter people to be aware of volatility smiles for foreign currency options. The employee googled a bit and came up with the following conclusions regarding the volatility behavior of foreign currency options. Which of the conclusions are true?

NOTE: This is too hard. Don't think and just do what your Boss tells you to do.

I. Implied volatility for deep in-the-money currency options is higher than it is for at-the-money options.
II. Implied volatility for deep out-of-the-money currency options is higher than it is for at-the-money options.
III. Currency traders believe there is a greater chance for extreme price movements than predicted by a lognormal distribution.
IV. Longer dated options tend to exhibit more of a volatility smile than shorter dated options.

a. I and III only.
b. II and IV only.
c. I, II, and III.
d. I, III, and IV.

.

[Kir'Eshe]

I'm going to say, boss, confusing currencies exist, I've found a set standard would make things easier. That's my choice and should you wish me to make you loot, that's where I'm at.

I. Volatility is a calculation. There is a history of currency value, you collect those values and do a statistical calculation of deviance from the mean. If there is a subjective value different from observed value in the question of in-the-money and at-the-money then that subjective value is a whole different evaluation. That's all the crushing I can do now, boss, I'm taking a coffee break.

[BigNorseWolf]

Ok, someone needs to explain the joke/point/.... whatever

[Kir'Eshe]

hm, I'm back from coffee, and this is an interesting question for me. I guess for the first question, implied has me confused. Salesmen and advertising can imply a great deal, as can the culture and mood of the exchange. I would guess that having more inputs to the option would cause a greater deviance from the mean, or higher standard deviation. I would collect data on sales when an option was showing a profit, then collect sales data on when the option was neutral, do the standard deviation calculation and compare the results. I'm going to guess that in-the-money has greater variance, but one cannot say without doing the calculation. I'm not going to hide and say this is fun for me and I can't believe that this thread had no replies to it.

[Kir'Eshe]

BigNorseWolf wrote:

Ok, someone needs to explain the joke/point/.... whatever

I don't know, thinking about math stuff is fun for me. I practiced it a great deal. It hasn't been useful in meeting emotional needs, just logical, but practically it's a hobby at this point. It'd be great if you could lay into the thread with a joke :`)

[Krensky]

BigNorseWolf wrote:

Ok, someone needs to explain the joke/point/.... whatever

It's a Grand Magus thread. The point os for them to come up with some silly, contrived 'problem' so you feel dumb and they can insult public education.

In other words:

It's an Akbar trap!

[Terquem]

Choosing the option of "doing what your boss tells you to do," requires high levels of intelligence of a different sort. If you truly do choose to try your best effort at doing what your boss tells you to do, you will be challenged to be certain that

A) You actually understand what your boss wants you to do
B) You do not insult your boss by implying that what he wants you to do is somehow beneath you (after all he or she hired you to do work that is assigned to you, and sometimes that work will seem menial, or counter intuitive, it is in those situations where you must apply your intelligence to asking questions that will inform your boss that you need more information without sounding like you don't know how to do your job)

Interpersonal Intelligence is as important to overall success in those job positions where you are in customer service, or in a position to be asked to follow instructions, as any other type of intelligence.

[zylphryx]

help wanted ad wrote:

Currency futures trader. Looking for someone to fill a recently vacated position. Knowledge of currency markets not required. Looking for a team player who does as they are instructed. Strong patsy tendencies a plus.

[SLAaDOS]

Krensky wrote:

BigNorseWolf wrote:

Ok, someone needs to explain the joke/point/.... whatever

It's a Grand Magus thread. The point os for them to come up with some silly, contrived 'problem' so you feel dumb and they can insult public education.

In other words:

It's an Akbar trap!

I continue to suspect Tensor/Grand Magus is a semi-autonomous knowbot that keeps popping in here to say "Psst... hey... What did you get for question #4?".

Dude, this is what happens when spend all night partying instead of studying for your Turing test.

[Treppa, Agent of C.H.A.O.S]

Is this a pbp recruiting thread? What's the point buy?