When currency options are not standardized and traded over-the-counter, there is less liquidity and a wider bid/ask spread.
A currency option is a contract which gives the buyer the right, but not the obligation, to buy or sell a certain currency at a specified exchange rate on or before a specified date. As, for this right, a premium is paid to the seller.
There is less liquidity, when the currency options are not standardized and traded over-the-counter. This means that markets have few opportunities to buy and sell, so there is a wider bid/ask spread, where the assets also become difficult to trade.
Hence, bid-ask spreads can widen during times of heightened market risk.
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