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.
INVESTOPEDIA EXPLAINS '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.

Trinomial Option Pricing Model
An option pricing model incorporating three possible values that ... 
Delta
The ratio comparing the change in the price of the underlying ... 
Option Pricing Theory
Any model or theorybased approach for calculating the fair ... 
Gamma
The rate of change for delta with respect to the underlying asset's ... 
Binomial Option Pricing Model
An options valuation method developed by Cox, et al, in 1979. ... 
Black Scholes Model
A model of price variation over time of financial instruments ...

Investing Basics
Beta: Know The Risk
Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here. 
Options & Futures
Breaking Down The Binomial Model To Value An Option
Find out how to carve your way into this valuation model niche. 
Options & Futures
An Introduction To GammaDelta Neutral Option Spreads
Find the middle ground between conservative and highrisk option strategies. 
Investing Basics
Pin Down Stock Price With Real Options
How can you assign a value to what a company may do with its business in the future? We explain how it works. 
Options & Futures
Cut Down Option Risk With Covered Calls
A good place to start with options is writing these contracts against shares you already own. 
Options & Futures
Getting To Know The "Greeks"
Understanding price influences on options positions requires learning about delta, theta, vega and gamma. 
Options & Futures
Volatility  The Birth Of A New Asset Class
Learn more about the trading possibilities with the VIX. 
Options & Futures
Determining Market Direction With VIX
The CBOE's volatility index is a helpful market indicator. Learn how it can gauge the mood of the stock market. 
Options & Futures
OutOfTheMoney Put Time Spreads
Learn about this lowrisk, bearish options strategy used to speculate on major market declines. 
Options & Futures
Going Long On Calls
Learn how to buy calls and then sell or exercise them to earn a profit.