a. When pricing an option using risk- neutral valuation, one is assuming that all investors are risk
Question:
b. Explain Robert Merton’s “Trick” in the context of options pricing.
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a This is false Riskneutral valuation is a trick that works because the economy is arbitrage free It ...View the full answer
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Related Book For 
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
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