# Tagged Questions

The tag has no usage guidance.

1answer
41 views

### Fees on derivatives

Since it's obviously not at their fair value that derivatives are priced, how do investment banks compute the fees that they add on top of the risk neutral price ?
1answer
74 views

### BSM Model - Actual probability

Actual probability of exercise of put option under BSM model is: PD = N(-d2(u)) (using expected return of stock, u) Risk-neutral equivalent is ...
2answers
137 views

### Do futures follow physical or risk-neutral distributions

I've spent a while looking for an answer to this question and while I feel it is a simple question I have not found an answer. I know prices of option contracts follow an implied, risk-neutral ...
1answer
151 views

### Risk Neutrality Necessary for Dual Delta Calculation?

I have an option chain for a specific expiry date. Then calculate dP/dK numerically for each pair of strikes. My hunch is that this calculation is not risk neutral in the strictest sense of the word ...
1answer
486 views

### Radon-Nikodym derivative and risk natural measure

I need help with my understanding of changing probability measure. Im not a mathematician so I hope for answers that are not too technical. As shown in this Wikipedia article http://en.wikipedia.org/...
1answer
169 views

### Prove that the binomial algorithm implies the arbitrage free price at t=0 of a T-claim

In Tomas Bjork's Arbitrage Theory in Continuous Time (or here), $\exists$ these propositions How does the first formula follow from from the algorithm? I get that $\Pi(0;X) = V_0(0)$, but I don't ...
2answers
905 views

### T-Forward Price on risk-neutral measure

i have and question concerning the T-forward price definition on the Robert J.Elliot's book : Mathematics of Financial Markets. On his chapter 9, definition 9.1.3 p.249. He give the formula without ...
0answers
119 views

### Estimating risk aversion (power or exponential utility) from options prices

I came across this literature and it seems like there are a number of ways people do this. You can do it for an option on any underlying as long as you can create the risk-neutral p.d.f. If you agree ...