Lecture 21
Video description: This lecture explores the fundamental concept of risk-neutral pricing as a powerful framework for derivative valuation, illustrated through examples like forward contracts and options. It further explains the derivation of the Black-Scholes equation from stochastic calculus, highlighting how derivative prices depend primarily on volatility and interest rates, not on investors’ risk preferences, and concludes with practical insights into option replication and hedging strategies.
Risk Neutral Valuation, Black-Scholes Equation Slides (PDF)
Lecture 22
Guest lecture with Ross Garon, Millennium Management
Lecture 22: The Spectrum of Systematic Trading Strategies in Liquid Instruments
Note: This lecture is not available to OCW learners.
