Mathematical Principles and Quantitative Finance · 09. novembre 2023
Financial models use Girsanov's Theorem to shift from real-world probabilities to risk-neutral ones, crucial for derivative pricing. It ensures arbitrage-free models in quantitative finance, adjusting processes like HJM, CIR, and Hull-White to reflect risk-neutral views for fair pricing.
#RiskNeutralProbabilities #GirsanovsTheorem #RadonNikodym
Stochastic Models and Processes · 08. septembre 2023
Unpack the myth that option Delta equals the probability of expiring in-the-money. Dive into risk-neutral valuation and the Black-Scholes model, where assets grow at a risk-free rate, making Delta an unreliable real-world probability indicator. Explore the distinction for smarter option trading. #OptionTrading #BlackScholes #RiskNeutralValuation