rho
n. countablen. a measure in finance that shows how much the price of an option changes when interest rates change. It helps investors understand how sensitive their options are to the cost of borrowing money.
n. a sensitivity measure in options trading that quantifies the rate of change in an option's price relative to a one-percentage-point change in the risk-free interest rate. It is one of the 'Greeks' used to assess risk in derivative portfolios.
The trader checked the rho to see how interest rates would affect his options.
When the central bank announced a rate hike, the portfolio manager reviewed the rho of each position to adjust for the expected price shifts.
While delta measures price sensitivity to the underlying asset, rho specifically captures the impact of interest rate fluctuations, which is particularly significant for long-dated options and deep-in-the-money positions.
From the name of the Ancient Greek letter ῥῶ (rhô).