DEFINITION of 'Gamma Pricing Model'
An equation for determining the fair market value of a Europeanstyle option when the price movement on the underlying asset does not resemble a normal distribution. The gamma pricing model is intended to price options where the underlying asset has a distribution that is either longtailed or skewed, where dramatic market moves occur with greater frequency than would be predicted by a normal distribution of returns.
BREAKING DOWN 'Gamma Pricing Model'
While the BlackScholes option pricing model is the best known, it does not provide accurate pricing results under all situations. In particular, the BlackScholes model assumes that the underlying instrument has returns that are normally distributed. As a result, the BlackScholes will misprice options on instruments that do not trade based on a normal distribution. Many alternative options pricing methods have been developed with the goal of providing more accurate pricing for realworld applications such as the Gamma Pricing Model. Generally speaking, the Gamma Pricing Model measures the gamma, which is how much fast the delta changes with respect to small changes in the underlying asset's price.

Gamma
The rate of change for delta with respect to the underlying asset's ... 
Color
The rate at which the gamma of an option or warrant will change ... 
Speed
The rate at which the gamma of an option or warrant will change ... 
Gamma Hedging
An options hedging strategy designed to reduce or eliminate the ... 
DeltaGamma Hedging
An options hedging strategy that combines a delta hedge and a ... 
Gamma Neutral
A method of managing risk in options trading by establishing ...

Investing
Explaining Gamma
Gamma is a measurement of how fast the delta of an optionâ€™s price changes after a 1point movement in the underlying security. 
Trading
An Introduction To GammaDelta Neutral Option Spreads
Find the middle ground between conservative and highrisk option strategies. 
Trading
Using Options Tools To Trade ForeignExchange Spot
Find out how delta, gamma, risk reversals and volatility can all help predict movements in the cash market. 
Trading
The Forex Greeks And Strategies
We look at the different kinds of Greeks and how they can improve your forex trading. 
Trading
How To Build Valuation Models Like BlackScholes (BS)?
Want to build a model like BlackScholes? Here are the tips and guidelines for developing a framework with the example of the BlackScholes model. 
Trading
Circumvent Limitations of BlackScholes Model
Mathematical or quantitative modelbased trading continues to gain momentum, despite major failures like the financial crisis of 200809, which was attributed to the flawed use of trading models. ... 
Trading
Getting To Know The "Greeks"
Understanding price influences on options positions requires learning about delta, theta, vega and gamma. 
Trading
Using "The Greeks" To Understand Options
These riskexposure measurements help traders detect how sensitive a specific trade is to price, volatility and time decay. 
Investing
Understanding the BlackScholes Model
The BlackScholes model is a mathematical model of a financial market. From it, the BlackScholes formula was derived. The introduction of the formula in 1973 by three economists led to rapid ...

Is there a better metric for hedging options than delta?
Learn about delta and gamma hedging options, why gamma is a better metric to use to hedge and how gamma can be used with ... Read Answer >> 
What is the average return on equity for a company in the electronics sector?
Learn about the BlackScholes option pricing model and the binomial options model, and understand the advantages of the binomial ... Read Answer >> 
How is implied volatility for options impacted by a bearish market?
Learn why implied volatility for option prices increases during bear markets, and learn about the different models for pricing ... Read Answer >> 
How is implied volatility used in the BlackScholes formula?
Learn how implied volatility is used in the BlackScholes option pricing model, and understand the meaning of the volatility ... Read Answer >> 
Can delta be used to calculate price volatility of an option?
Learn how implied volatility is an output of the BlackScholes option pricing formula, and learn about that option formula's ... Read Answer >> 
How does implied volatility impact the pricing of options?
Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options. Read Answer >>