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.

However, it can be considered to obtain u and d under the assumptions that the

risk-neutral probabilities q and 1 - q are equal to 0.