Actuarial Mathematics
Theta is a measure of the rate at which the price of an option decreases as it approaches its expiration date, representing the time decay of the option's value. It quantifies the impact of time on the pricing of options, and is critical for traders and investors to understand because it affects their strategies regarding holding or exercising options. A high theta indicates that an option's price will decrease significantly over time, while a low theta suggests that the option retains its value longer as expiration approaches.
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