Groundlearn / Glossary / Rho
Rho
A CFA and FRM term, defined in plain English with the distinction examiners test.
What it means
The sensitivity of an option’s value to a change in the risk-free rate.
Where it appears in the syllabus
- DerivativesCFA Level II · exam weight 5–10% · Forward commitments and contingent claims — binomial, BSM, the Greeks.
- Valuation & Risk ModelsFRM Part I · exam weight 30% · VaR and ES, option valuation, bond risk, stress testing, credit and op risk.
Related terms
- Black–Scholes–Merton modelA closed-form model for European option prices, assuming lognormal prices, constant volatility and continuous…
- GammaThe rate at which delta changes as the underlying moves.
- Implied volatilityThe volatility that, put into an option pricing model, returns the option’s observed market price.
- ThetaThe change in an option’s value from the passage of one day, all else equal.
- VegaThe change in an option’s value for a one point change in implied volatility.
- Delta hedgingOffsetting an option position with the underlying so the combined position is insensitive to small price moves.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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