An option pricing model that is designed to measure the change in the price of an option as a result of a change in the option’s delta. The change in delta is known as gamma: this results from a change of more than one point in the underlying price or rate or in time.

This model is constructed as an equation for calculating the fair market value of European-style options, assuming or given that the price change pattern is not normal distribution. In other words, the underlying asset price/ rate follows long-tailed or skewed distribution: underlying price change tends to be skewed to the downside (as opposed to normal distribution).