- CFA Exams
- CFA Level I Exam
- Study Session 14. Derivatives
- Reading 38. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility

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**CFA Practice Question**

When gamma is large, there will be a large change in the ______.

A. option price for a small change in the underlying price

B. underlying price for a small change in the option price

C. change rate of the option price for a small change in the underlying price

**Explanation:**Gamma measures how sensitive the delta is to a change in the underlying and delta measures the change rate of the option price for a small change in the underlying price.

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**User Contributed Comments**
4

User |
Comment |
---|---|

americade |
lesson for people who only read one choice quickly, #1 will trick you everytime, though you know what gamma is. |

osunks |
Very true. I went for 1 and did not read the other choices, even though i know gamma in my sleep. |

richmondo |
Think of gamma as the second derivative - |

bodduna |
First choice is Delta. |