Risk neutral valuation: Difference between revisions

Revision as of 22:12, 17 April 2016

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.

Revision as of 14:09, 20 August 2013 (view source) imported>Doug Williamson m (Spacing and category added 20/8/13) ← Older edit		Revision as of 22:12, 17 April 2016 (view source) imported>Doug Williamson (Expand.) Newer edit →
Line 1:		Line 1:
	~~Methods~~ which do not depend on knowing or assuming the attitudes to risk of market participants.		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.		Instead, they are based on no-arbitrage assumptions and on constructing replicating portfolios of simpler instruments.