Risk neutral valuation

From ACT Wiki
Revision as of 14:09, 20 August 2013 by imported>Doug Williamson (Spacing and category added 20/8/13)
Jump to navigationJump to search

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