Risk neutral valuation

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

• Arbitrage
• Black Scholes option pricing model
• Neutral
• No arbitrage conditions
• Replicating portfolio