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. | Instead, they are based on no-arbitrage assumptions and on constructing replicating portfolios of simpler instruments. | ||
Revision as of 22:15, 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.
