Explain why$$ risk$-$neutral probabilities can be used to price derivative securities in a world where investors are risk averse.

Question content area bottom

Part $1$

$$Risk$-$neutral probabilities can be used to price derivative securities$$ because:$($Select the best choice$$ below.$)$

A$.$

The pricing of derivatives only depends on the characteristics of the underlying asset.

B$.$

The pricing of derivatives only depends on the prevailing$$ risk$-$free rate.

C$.$

The pricing of derivatives only depends on the relationship between the actual probabilities and the$$ risk$-$neutral probabilities.

D$.$

The pricing of derivatives only depends on the level of risk that investors are willing to take.