lambda Hear it!

lambda definition - finance
The ratio of the percentage change in an optionÂ’s price to the percentage change in an underlying price. Lambda measures the change in option premiums for a percentage point change in the optionÂ’s implied volatility. If lambda is high, the value of an option is very sensitive to even small changes in volatility. A low lambda means that volatility changes have little impact on the value of an option.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

Comments
Improve this definition.
Do you have more to add? Share your linguistic knowledge or observation.
/Register to save your comments.
Related Discussions (1)
TopicRepliesLatest Post
Alpha Lambda Zeta Fraternity, Inc.45 months ago

Browse Forums