Vega[4] measures sensitivity to volatility. Vega is the derivative of the option value with respect to the volatility of the underlying asset.
Vega is not the name of any Greek letter. However, the glyph used is the Greek letter nu (
u). Presumably the name vega was adopted because the Greek letter nu looked like a Latin vee, and vega was derived from vee by analogy with how beta, eta, and theta are pronounced in American English. Another possibility is that it is named after Joseph De La Vega, famous for Confusion of Confusions, a book about stock markets and which discusses trading operations that were complex, involving both options and forward trades.[6]
The symbol kappa, kappa, is sometimes used (by academics) instead of vega (as is tau ( au) or capital Lambda (Lambda)[7]:315, though these are rare).
Vega is typically expressed as the amount of money per underlying share that the option's value will gain or lose as volatility rises or falls by 1%.
Vega can be an important Greek to monitor for an option trader, especially in volatile markets, since the value of some option strategies can be particularly sensitive to changes in volatility. The value of an option straddle, for example, is extremely dependent on changes to volatility.