Question: a. What is risk-neutral valuation? Why is the expected return on a stock price irrelevant when valuing stock options? (6 points) b. Explain Black's approximation

a. What is risk-neutral valuation? Why is the expected return on

a. What is risk-neutral valuation? Why is the expected return on a stock price irrelevant when valuing stock options? (6 points) b. Explain Black's approximation in valuing American options using Black-Scholes (4 points)

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