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.