Theta is the exposure of an option position to changes in short-term interest rates,
in particular, to the rate at which the option position is financed. Formally, it is
defined as the partial derivative of the option value with respect to the interest rate.
Like vega, theta is measured in dollars or other base currency units.
Theta, in a sense, is not a risk, since it not random. Rather, it is a cost of holding
options and is similar to cost-of-carry in forward and futures markets. However,
unlike cost-of-carry, theta is not a constant rate per unit time, but depends on other
factors influencing option prices, particularly moneyness and implied volatility.
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