Risk neutral valuation: Difference between revisions
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Valuation methods which do not depend on knowing or assuming the attitudes to risk of market participants. | |||
Instead, they are based on no-arbitrage assumptions and on constructing replicating portfolios of simpler instruments. More complex instruments and positions are then valued indirectly, by calculating the value of the replicating portfolio. | |||
Instead, they are based on no-arbitrage assumptions and on constructing replicating portfolios of simpler instruments. | |||
More complex instruments and positions are then valued indirectly, by calculating the value of the replicating portfolio. | |||
== See also == | == See also == | ||
* [[Arbitrage]] | * [[Arbitrage]] | ||
* [[Black Scholes option pricing model]] | * [[Black Scholes option pricing model]] | ||
* [[Neutral]] | |||
* [[No arbitrage conditions]] | |||
* [[Replicating portfolio]] | * [[Replicating portfolio]] | ||
[[Category:Financial_risk_management]] | |||
Latest revision as of 11:48, 29 March 2023
Valuation methods which do not depend on knowing or assuming the attitudes to risk of market participants.
Instead, they are based on no-arbitrage assumptions and on constructing replicating portfolios of simpler instruments.
More complex instruments and positions are then valued indirectly, by calculating the value of the replicating portfolio.
