15.997 Practice of Finance: Advanced Corporate Risk Management

Pricing Risk MIT Sloan School of Management 15. 997 Advanced Corporate Risk Management John E. Parsons Overview Two Alternative Methods for Discounting Cash Flows Risk-Neutral Pricing – an Introduction ¾ State Prices ¾ The Risk-Neutral Probability Distribution ¾ The Forward Price as a Certainty-Equivalent Implementing Risk-Neutral Valuation ................
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