SIE practice questionmediumGreeks basics
What does 'vega' represent in options pricing?
- ASensitivity to interest rates
- BSensitivity to changes in time
- CSensitivity to changes in underlying price
- DSensitivity of an option's price to changes in volatility✓ Correct answer
Explanation
Why D — Sensitivity of an option's price to changes in volatility
Vega measures response to volatility. Time sensitivity is theta, price is delta, rates is rho.
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