Risk-Neutral Pricing Models
From Open Risk Manual
Revision as of 13:58, 19 November 2019 by Wiki admin (talk | contribs)
Definition
Large class of models used for pricing and hedging derivative products (i.e., contracts whose value derives from a primary traded asset). The models determine hedging strategy and upfront PnL recognition.
They are also used for computing sensitivities in the evaluation of market risk and future credit exposure in assessing counterparty credit risk.