Finance & Options
Risk-Neutral Probabilities for Dummies
Why an option’s price doesn’t depend on the probability the stock goes up.
What to remember
- Price = cost of the replicating portfolio.
- The risk-neutral q makes the stock grow at r; the real p never enters.
- Parity: C − P = S − K e^(−rT).
Read the lessonRisk-Neutral Pricing, with a checkpoint at the end.