Risk neutral valuation: Difference between revisions

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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. 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.


See also