In

finance, Gamma measures the change in

delta for a small change in the price of the

underlying instrument.

Mathematically, gamma can be considered to the be second

derivative of the function pricing the underlying instrument.

Gamma is of interest since it is a measurement of how quickly

delta changes. If a trader

*delta hedges* her portfolio, gamma will measure how often she will have to

*rehedge*, or rebalance her portfolio in order to stay hedged.

In economic terms,

delta is the cost of hedging, while

gamma is the cost of

*staying* hedged.