A measure of loss in the time value of an option (or an option portfolio) as a result of the passage of time (the so-called theta or rent) that is modified using current volatility (rather than forward volatility). More specifically, it captures the price of an option (option premium) today (calculated based on current volatility) minus the price of an identical option tomorrow (calculated based on the volatility of the option with a one-day shorter term).

Modified decay takes into consideration the possible downward shift in the volatility curve over time.

It is also known as modified theta.