How Does Volatility (Vega) Influence the Premium of a Financial Derivative like an Option?

Volatility, measured by the Greek letter Vega, has a direct and positive correlation with an option's premium. Higher expected volatility in the underlying asset increases the probability that the option will expire in-the-money, making the option more valuable.

Therefore, a higher Vega means that the option's price will increase when market expectations of future volatility rise, and decrease when they fall.