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A risk-neutral measure is a probability measure that yields an expected present value (discounted at the risk-free rate) which is equal to the current market price. The risk-neutral measure is also called an equivalent martingale measure.

A risk-neutral measure is a probability measure that yields an expected present value (discounted at the risk-free rate) which is equal to the current market price. The risk-neutral measure is also called an equivalent martingale measure and differs from the physical measure (aka "real world probability") by only a mean shift.

The risk-neutral measure may be recovered from option prices using the technique of Breeden and Litzenberger (1978). While this is appealing, efforts to then find the necessary mean shift have been unsuccessful. Carr and Yu (2012), later extended by Ross (2015) can be promising for some instruments but does not work for any instrument in zero-net-supply (e.g. futures, forwards, swaps, options). Furthermore, Borovička, Hansen, and Scheinkman (2016) and Jackwerth and Menner (2017) have cast doubt on whether these techniques are even successful for any instruments.