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Key Financial Market Concepts, 2nd Edition by Bob Steiner

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The ‘Greeks’: Delta, Gamma, Vega, Theta and Rho

Definition

The delta (Δ) of an option is the change in the value of the option as a proportion of the change in the value of the underlying.

The gamma (Γ) of an option is the change in the value of the option’s delta as a proportion of the change in the value of the underlying.

The vega of an option is the change in the value of the option as a proportion of the change in volatility.

The theta (Θ) of an option is the change in the value of the option as a proportion of the change in time.

The rho (ρ) of an option is the change in the value of the option as a proportion of the change in the interest rate.

Each of these sensitivities assumes infinitesimally small changes and also assumes that other ...

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