Interview Question: A Greek Test

Sample Question #176 (finance – derivatives pricing)

True or False:  The vega of a derivative such as an option is a measure of how much the price of the derivative will change with respect to its volatility.  Explain.

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One Response to Interview Question: A Greek Test

  1. Brett says:

    ANSWER
     
    False. Vega measures the change in derivative price with respect to volatility in the  underlying asset, not in the derivative itself.
     

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