Vega of an option formula
Financial acronyms
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Description of the Vega of an option formula
Formula for the calculation of an options vega. Vega is the sensitivity of an option's price to changes in the volatility of its underlying. It is identical for both call and put options.
Formula
\[ \nu = S \phi \left ( d1 \right ) \sqrt{t} \] \[ {\small where: \phi\left ( d1 \right ) = \frac{e^{-\frac{d1^{2}}{2}}}{\sqrt{2\pi}} } ; \] \[ {\small d1 = \frac{ln \left( \frac{S}{K} \right ) + \left(r+\frac{\sigma^{2}}{2}\right)t}{\sigma\sqrt{t}} } \ \]
Symbols
\(K\ \)
Option strike price
\(N\ \)
Standard normal cumulative distribution function
\(r\ \)
\(σ\ \)
Volatility of the underlying
\(S\ \)
Price of the underlying
\(t\ \)
Time to option's expiry
Additional information related to this formula
Related definitions from the glossary of financial terms
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Option strategy calculator • Pricing of an option (Black & Scholes)