Question

Which is the ratio of change in option premium for the unit change in interest rates?

Answer 1

Answer:

Rho measures the change in premiums due to a 1% change in the prevailing risk-free interest rate. Thus, a rho of 0.05 means that the theoretical value of call premiums will increase by 5%, whereas the theoretical value of put premiums will decrease by 5%, because put premiums move opposite to interest rates.

Explanation:

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