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