# Risk neutral valuation formula

I am totally new to Finance and Arbitrage theory and I have started reading Björk (2018) Arbitrage theory in continuous time. Can anyone please explain to me what is the risk-neutral valuation formula in an intuitive manner? Moreover is there any introductory textbook on "Arbitrage theory"?

• In the simplest terms (perhaps too simple) the intuition of the RNVF is that the value is equal to the Expectation (a linear operator on the different possible outcomes), but this Expectation must be taken under a specific Probability Measure, the so called Risk Neutral Measure $Q$, which is perhaps rather surprising.And this result is a consequence of the no-arbitrage assumption. – noob2 Nov 7 '18 at 21:45
• "No arbitrage" is a basic principle of Economics which says that in well-functioning markets it should not be possible for someone to make infinite profits without any risk. It is too simple and intuitive a principle to deserve a whole introductory textbook. – noob2 Nov 7 '18 at 22:34