Hi, i have a question on the distributional assumption made. In chapter 13 (section 6), the main assumption that is made is that the rate of return on the stock at time t from reference time t0 is log-normally distributed. However, they make a statement that this is the case "under risk-neutral law". In a risk neutral world, wont the rate of return expected by investors remain the same? I referred to John C Hull on risk neutrality and this is what it had to say:"This states that, when valuing a derivative, we can make the assumption that investors are risk-neutral. This assumption means investors do not increase the expected return they require from an investment to compensate for the increased risk" What I take from this is that every security will have the same rate of return. Then why do we make the distributional assumption? Sorry for the long post Regards, Sunil