TL;DR
The rate of change of delta with respect to underlying price: \( \Gamma = \frac{\partial^2 V}{\partial S^2} = \frac{\partial \Delta}{\partial S} \). It measures the curvature of the option price function.
Gamma (Greek)
The rate of change of delta with respect to underlying price: \( \Gamma = \frac{\partial^2 V}{\partial S^2} = \frac{\partial \Delta}{\partial S} \). It measures the curvature of the option price function.
Why it matters for interviews
Gamma determines how quickly a delta hedge becomes stale. High gamma near expiration means frequent rebalancing. Gamma P&L (from realized vs implied volatility) is a key concept in options trading.
Definition and Mathematical Foundation
The rate of change of delta with respect to underlying price: \( \Gamma = \frac{\partial^2 V}{\partial S^2} = \frac{\partial \Delta}{\partial S} \). It measures the curvature of the option price function.
Application in Quantitative Finance
Gamma determines how quickly a delta hedge becomes stale. High gamma near expiration means frequent rebalancing. Gamma P&L (from realized vs implied volatility) is a key concept in options trading.
Related Terms
Ready to practice for the Quant Trading Interview?
Adaptive practice powered by Item Response Theory targets your weak areas. Start with 3 free sessions.
Start free practice →