Vega

Mar 31, 2016

measure

Vega is the percentage change of the option’s price relative to an increase of 1% of the volatility.

$\frac{\partial V}{\partial \sigma} = S \sqrt{T}e^{-qT}N'(d1)$

where $N'(x) = \frac{1}{\sqrt{2\pi}} e^{-x^2/2}$