The rate at which delta changes as the underlying price changes. High gamma means a delta hedge needs frequent adjustment.
Where you will meet it
Gamma comes up in 12 learning outcome notes across the FRM syllabus.
A few of them:
Calculating and Applying VaR FRM Part I · Valuation and risk models
“Their value is a curved or kinked function of the risk factor, and gamma or convexity matters.”
The Evolution of Stress Testing Counterparty Exposures FRM Part II · Credit risk measurement and management
“Sensitivity-based estimates use CS01 and delta and gamma terms, including cross terms.”
Liquidity Risk FRM Part II · Liquidity and treasury risk measurement and management
“Examples are stop-loss rules, portfolio insurance, and the delta hedging of short option positions (negative gamma).”
VaR Mapping FRM Part II · Market risk measurement and management
“Limits: linear mapping misstates the result for options because it ignores gamma, and it ignores basis risk, so large shocks call for delta-gamma or full revaluation.”
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