The gamma of an option is:
A) The sensitivity of the option value to changes in volatility
B) The sensitivity of the option value to changes in the time to expiry
C) The sensitivity of the delta to changes in the value of the underlying
D) The sensitivity of the option value to changes in the price of the underlying

Question

Quizplus · Accepted Answer

Gamma is the second derivative of the option value with respect to the underlying price. It measures the rate of change in the delta of an option for a given change in the price of the underlying asset. Therefore, it represents the sensitivity of the delta to changes in the value of the underlying.

The Gamma of an Option Is