Options pricing

Rho

Option-value sensitivity to a change in interest rates.

01 / Definition

What Rho Means

Rho estimates theoretical price change for a one-percentage-point rate move, holding other model inputs constant. Calls usually have positive rho and puts negative rho.

02 / Calculation

Rho Formula

Rho ≈ option-value change for a 1 percentage-point rate increase

03 / Worked Example

How to Read the Result

A call rho of 0.12 suggests a move from 4% to 5% adds about $0.12 to modeled value, all else equal.

04 / Boundaries

Limitations

Real inputs do not remain constant.
Broker scaling conventions differ.
Rate curves and early exercise may need richer models.

05 / Questions

Common Questions

Why is rho often small?

Short-dated options are usually less rate-sensitive than price-, time-, or volatility-sensitive.