Vega is defined as
A)the change in the value of an option for a dollar change in the price of the underlying asset.
B)the change in the value of the underlying asset for a dollar change in the call price.
C)the percentage change in the value of an option for a one percent change in the value of the underlying asset.
D)the change in the volatility of the underlying stock price.
E)the sensitivity of an option's price to changes in volatility.

Question

Quizplus · Accepted Answer

Vega is the sensitivity of an option's price to changes in the volatility of the underlying asset. In other words, it measures how much the option price will change for a one percent change in volatility. Therefore, the correct answer is E.

Vega Is Defined as