The Effect on an Option's Value of a Small Change

question 6

Multiple Choice

The effect on an option's value of a small change in the value of the underlying asset is called the option:

• A)theta.
• B)vega.
• C)rho.
• D)delta.
• E)gamma.

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Definitions:

Equilibrium Price

The rate at which the supply of products aligns perfectly with the demand for these goods.

Quantity Demanded

The amount of a good or service consumers are willing and able to purchase at a given price level, during a specified period.

Quantity Supplied

The volume of goods or services that manufacturers are ready and able to supply at a specific price point within a set duration.

Excess Supply

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price, often leading to a decrease in prices.