The ratio of the percentage change in an option contract's price to the percentage change in the option's underlying price. Lambda is one of the Greeks – a collection of risk measures or risk sensitivities that are frequently used in options and derivatives analysis. Each Greek measures the sensitivity of a value in relation to a small change in an underlying parameter. Lambda measures the change in option premiums for a percentage point change in its implied volatility. When the lambda value is high, the price of an option will be more sensitive to small changes in volatility. Conversely, when lambda is low, changes in volatility will have less impact on the option's value.

Lambda is one of many Greeks used in determining and managing risk in options and derivatives trading and investing. The most common Greeks used are: Delta, which measures the rate of change of option value in response to changes in the price of the underlying instrument; Vega, which measures sensitivity to volatility; Theta, which measures the sensitivity of the value against the passage of time; Rho, which measures sensitivity to the interest rate and Gamma, which measures the rate of change in the Delta with respect to changes in the price of the underlying instrument.

Investment dictionary. . 2012.

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  • Lambda — (uppercase Λ, lowercase λ; el. Λάμβδα or el. Λάμδα, Lamda) is the 11th letter of the Greek alphabet. In the system of Greek numerals it has a value of 30. It was derived from the Phoenician letter Lamed the name of the letter, Λάμδα, is… …   Wikipedia

  • lambda — [ lɑ̃bda ] n. m. et adj. inv. • av. 1550; mot gr. 1 ♦ Lettre de l alphabet grec (Λ, λ) correspondant au l latin. En forme de lambda ( LAMBDOÏDE adj. , 1534 ). (à cause de la forme de la courbe) Phys. Point lambda : température extrêmement basse… …   Encyclopédie Universelle

  • Lambda — Lamb da, n. [NL., fr. Gr. la mbda.] 1. The name of the Greek letter [Lambda], [lambda], corresponding with the English letter L, l. [1913 Webster] 2. (Anat.) The point of junction of the sagittal and lambdoid sutures of the skull. [1913 Webster]… …   The Collaborative International Dictionary of English

  • lambda (1) — {{hw}}{{lambda (1)}{{/hw}}s. m. inv. Nome dell undicesima lettera dell alfabeto greco. lambda (2) {{hw}}{{lambda (2)}{{/hw}}s. m. inv. 1 (anat.) Punto di incontro della sutura tra le ossa parietali con le suture occipitali parietali. 2 (fis.)… …   Enciclopedia di italiano

  • lambda — [lam′də] n. [Gr < Sem, as in Heb lāmedh, LAMED] 1. the eleventh letter of the Greek alphabet (Λ, λ) 2. Particle Physics an uncharged hyperon with a mass of c. 1,115.68 MeV/c, which is c. 2,183 times the mass of an electron: it decays very… …   English World dictionary

  • lambda — punto craneométrico en la unión de las suturas interparietal y parietooccipitale que en conjunto forman la sutura lamboidea Diccionario ilustrado de Términos Médicos.. Alvaro Galiano. 2010. lambda …   Diccionario médico

  • lambda — LÁMBDA s. m. literă a alfabetului grecesc, corespunzătoare literei l. (< fr., gr. lambda) Trimis de raduborza, 15.09.2007. Sursa: MDN …   Dicționar Român

  • Lambda — (gr.), das griechische L; daher Lambdakismus, 1) Fehler in der Aussprache, wenn man ein j nach dem L hören läßt; 2) wenn das L statt des R ausgesprochen wird; 3) wenn das L zu oft im Anlaut wiederholt wird, z.B. luna lucebat luce alba …   Pierer's Universal-Lexikon

  • Lambda — Lambda, griech. Buchstabe (Λ, λ), entsprechend dem »L«. Daher Lambdazismus (auch Lallation genannt), die fehlerhafte Aussprache des r, wobei an Stelle dieses Buchstabens ein l gehört wird …   Meyers Großes Konversations-Lexikon

  • Lambda — Lambda, das griech. L (Δ, λ); Lambdazismus, fehlerhafte Aussprache des L (wie R) …   Kleines Konversations-Lexikon

  • lambda — notation …   Philosophy dictionary

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