Rho

AAA

DEFINITION of 'Rho'

The rate at which the price of a derivative changes relative to a change in the risk-free rate of interest. Rho measures the sensitivity of an option or options portfolio to a change in interest rate.

INVESTOPEDIA EXPLAINS 'Rho'

For example, if an option or options portfolio has a rho of 12.124, then for every percentage-point increase in interest rates, the value of the option increases 12.124%.

RELATED TERMS
  1. Zomma

    An options greek used to measure the change in gamma in relation ...
  2. Gamma

    The rate of change for delta with respect to the underlying asset's ...
  3. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  4. Greeks

    Dimensions of risk involved in taking a position in an option ...
  5. Vega

    The measurement of an option's sensitivity to changes in the ...
  6. Option

    A financial derivative that represents a contract sold by one ...
Related Articles
  1. How Companies Use Derivatives To Hedge ...
    Active Trading

    How Companies Use Derivatives To Hedge ...

  2. Dividends, Interest Rates And Their ...
    Options & Futures

    Dividends, Interest Rates And Their ...

  3. Interest Rates And Your Bond Investments
    Investing Basics

    Interest Rates And Your Bond Investments

  4. How To Buy Oil Options
    Options & Futures

    How To Buy Oil Options

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center