Answer: Beta

## Explanation **Beta** is the least appropriate measure for evaluating the risk of a currency option because: 1. **Beta measures systematic risk** - Beta is a measure of a security's volatility in relation to the overall market (systematic risk). It's primarily used for equities and measures how much a stock's returns move relative to the market. 2. **Currency options have different risk factors** - Currency options are derivatives whose value depends on exchange rate movements, not on market beta. Their risk is better measured by: - **Delta**: Measures sensitivity to changes in the underlying currency exchange rate - **Vega**: Measures sensitivity to changes in volatility of the underlying currency - **Gamma**: Measures the rate of change of delta - **Theta**: Measures time decay - **Rho**: Measures sensitivity to interest rate changes 3. **Beta is irrelevant for currency derivatives** - Since currency options are not correlated with equity market movements in the same way stocks are, beta provides little meaningful information about their risk profile. **Correct answer: A (Beta)** Both Vega (B) and Delta (C) are appropriate measures for evaluating currency option risk: - **Delta** measures how much the option price changes for a $1 change in the underlying currency exchange rate - **Vega** measures how much the option price changes for a 1% change in implied volatility of the underlying currency

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