What Is Vega?

Vega is a term used in trading which measures the sensitivity of an option to changes in the volatility of the underlying asset, i.e. if an asset moves in price by 5% what will be the corresponding change in price of an option based on that asset?

Vega is different to delta as it does not concern itself with the change in the price of the underlying asset, but rather the volatility of the underlying asset.

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