The gamma value that results when the delta of an underlying risk factor changes considerably without any movement in its price but simply by the change in the price of another underlying risk factor. In other words, in situations where there are two underlying risk factors, cross gamma is typically used to quantify the change in delta as an underlying moves, affecting the delta of the other.
Cross gamma effects can be observed in structured products that provide optionality over a basket of names (basket of options). These products may often be hedged by positions in individual options. As such, the value of a particular product depends on both the asset values.
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