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SIE: Options
SIE practice questionmediumGreeks basics

What does 'vega' represent in options pricing?

  1. ASensitivity to interest rates
  2. BSensitivity to changes in time
  3. CSensitivity to changes in underlying price
  4. DSensitivity of an option's price to changes in volatility✓ Correct answer
Explanation

Why DSensitivity 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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