The measure of an asset's price sensitivity to changes in the market is known as?

The measure of an asset's price sensitivity to changes in the market is referred to as beta. This metric is particularly significant in finance as it quantifies the relationship between the asset’s movements and the movements of the overall market. A beta of 1 indicates that the asset's price tends to move with the market, while a beta greater than 1 suggests higher volatility compared to the market, indicating that the asset is likely to experience larger price swings. Conversely, a beta less than 1 indicates lower volatility relative to the market.

This understanding enables investors and analysts to assess the risk associated with an asset, making it crucial for portfolio management and investment decision-making. By analyzing beta, one can determine how much an asset might contribute to the overall risk of a portfolio, helping in balancing investment choices based on risk tolerance and market behavior.

Other terms, while they relate to price sensitivity in different contexts, serve distinct purposes: delta measures the sensitivity of an option's price to changes in the price of the underlying asset, gamma assesses the rate of change of delta, and theta reflects the time decay of options. Each concept is vital in its own right, but beta specifically addresses market volatility and correlation, making it the correct choice for this question.