Rho (the Greek letter *ρ*) is the rate of change of the price of a portfolio or derivative with the interest rates. It is the measure of the interest rate sensitivity of a portfolio or security.

It is approximately the percentage change in value that will result from a one percent change in interest rates.

More rigorously:

ρ= (∂P)/(∂r)

where *P* is the price of the security and

*r* is the risk free rate.

Rho is used in dynamic hedging strategies in order to hedge against the risk of interest rate changes. It is usually used in hedging bond portfolios as they usually heavily exposed to interest rate risk.