1 Cross Volatility. Exchange rates are expressed relative to a base currency, usually the dollar. The cross rate is the exchange rate between two currencies other than the reference. Denote S1 represents the dollar/pound rate and that S2 represents the dollar/euro (EUR) rate, and S3 the euro/pound rate is given by the ratio currency. a) Find the representation of S3 via S1 and S2, from which derive the log value log(S3). The log(Si) is called the cross rate. b) Find the volatility of the cross rate 3 of log(S3)