TransMarket Group interview question

What is gamma ?

Interview Answer

Anonymous

1 Oct 2016

The Gamma of a derivative measures by how much delta changes with respect to a small change in the underlying price. Gamma is the essence of optionality; it measures the non-linearity. Also, it is greatest for options that are close to at-the-money. To make it simple, Gamma is the second derivative of delta with respect to the price of the underlying.