Risk-neutral


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Risk-neutral

Insensitive to risk.

Risk Neutral

A situation in which an investor effectively ignores risk in making investment decisions. Given two investments with different levels of riskiness, a risk neutral investor considers only the expected return from each investment. As such, being risk neutral differs significantly from both risk aversion and risk seeking.
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With the model in place, the price of a call and put option on Firms A and B can itself be represented in a state-contingent framework as a risk-neutral expectation of the possible payoffs in each state.
The less popular view is of risk-neutral insurance firms selling to other risk-neutral firms and to risk-averse households.
The study finds that ERCOT's current energy-only market design can be expected to support an average reserve margin that is above the risk-neutral economic optimum, but substantially below the reserve margin consistent with the traditional reliability standard.
Among his topics are stochastic processes and risk-neutral pricing, pricing derivatives with transform techniques, finite differences, simulation methods for pricing derivatives, and model calibration.
In this case, the probability of success or failure can be understood in a risk-neutral framework as in financial option pricing models of Black and Scholes (1973) or Cox, Ross, and Rubinstein (1979).
A risk-neutral person would choose Option A in lotteries 1 through 7 and then switch to Option B in lottery 8.
We consider a supply chain system with a risk-neutral manufacturer as the leader and a risk-averse retailer as the follower with uncertain demand.
A risk-neutral funder could vastly reduce the uncertainty in the outcome by providing a floor for the settlement and thus making it worthwhile to pursue the claim.
assumes that investors are risk-neutral but subject to liquidity
However, when people are asked to make decisions for others, they tend to make decisions closer to risk-neutral preferences.
By employing the Cox-Ross (1976) risk-neutral valuation relation (RNVR), we are able to obtain closed-form (and numerical) solutions.