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+Rho and Interest Rates
+Rho is a measurement of the sensitivity of an option’s value to a change in
+the interest rate. To understand how and why the interest rate is important to
+the value of an option, recall the formula for put-call parity stated in
+Chapter 6.
+Call + Strike − Interest = Put + Stock 1
+From this formula, it’s clear that as the interest rate rises, put prices must
+fall and call prices must rise to keep put-call parity balanced. With a little
+algebra, the equation can be restated to better illustrate this concept:
+and
+If interest rates fall,
+and
+Rho helps quantify this relationship. Calls have positive rho, and puts
+have negative rho. For example, a call with a rho of +0.08 will gain $0.08
+with each one-percentage-point rise in interest rates and fall $0.08 with
+each one-percentage-point fall in interest rates. A put with a rho of −0.08
+will lose $0.08 with each one-point rise and gain $0.08 in value with a one-
+point fall.
+The effect of changes in the interest variable of put-call parity on call and
+put values is contingent on three factors: the strike price, the interest rate,
+and the number of days until expiration.
+Interest = Strike×Interest Rate×(Days to Expiration/365) 2
+Interest, for our purposes, is a function of the strike price. The higher the
+strike price, the greater the interest and, consequently the more changes in
+the interest rate will affect the option. The higher the interest rate is, the
+higher the interest variable will be. Likewise, the more time to expiration,