- CFA Exams
- CFA Level I Exam
- Study Session 19. Portfolio Management (2)
- Reading 55. An Introduction to Risk Management
- Subject 4. Measuring and Modifying Risks

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**CFA Practice Question**

The sensitivity of a call option's price to a small change in the volatility of the underlying asset is called the ______.

A. delta

B. gamma

C. vega

**Explanation:**Vega represents the amount that an option contract's price changes in reaction to a 1% change in the volatility of the underlying asset. Volatility measures the amount and speed at which price moves up and down, and is often based on changes in recent historical prices in a trading instrument.

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**User Contributed Comments**
1

User |
Comment |
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Miqizjg |
Delta: Sensitivity of derivative value to the price of underlying asset Gamma: Sensitivity of derivative value to the change of price of underlying asset Vega: Sensitivity of derivative to the volatility of price of underlying asset Rho: Sensitivity of derivative to changes in the risk-free rate |