Today I introduced the notions …

Today I introduced the notions of "arbitrage opportunity" and "risk neutral probability measure". I proved the important theorem stating that the absence of arbitrage opportunities is equivalent to the existence of a risk neutral probability measure. On Thursday I will continue lecturing from the book and also post some exercises to be discussed on Tuesday next week.

Published Sep. 8, 2009 7:01 PM - Last modified Nov. 24, 2009 10:40 PM