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12. Which one of the following choices measures the change in the option value for a...

12. Which one of the following choices measures the change in the option value for a one percent change in volatility? M a. Delta M b. Gamma M c. Theta M d. Vega M e. Rho

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Answer #1

Answer d: Vega

Vega measures the change in the option value for a one percent change in volatility.

Whereas

Delta Measures the degree to which an option is exposed to shifts in the price of the underlying asset or commodity.

Gamma Measures the rate of change of delta, which is how much an option price changes a given a one-point movement in the underlying asset.

Theta Measures quantify the risk that time imposes on options as options are only exercisable for certain period of time.

Rho Measures the sensitivity of an option or options portfolio to change in interest rate.

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