Risk neutral and real world probability

Discussion in 'CT8' started by Rajat gupta, Aug 12, 2018.

  1. Rajat gupta

    Rajat gupta Ton up Member

    Hi All,

    Can somebody explain difference between risk neutral and real world probability? What I have understand is that risk neutral probability is not a real probability but a derived probability which assumes investor to be risk neutral. While a real world probability assumes an investor to be risk averse. What additional differences can be drawn between the two?

    Regards,
    Rajat
     

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