Explain robert mertons trick in context of options pricing

Reference no: EM131458119

Question: a. When pricing an option using risk-neutral valuation, one is assuming that all investors are risk neutral. Hence, if one believes that investors are risk averse, risk-neutral valuation cannot be used. True or false? Explain your answer.

b. Explain Robert Merton's "Trick" in the context of options pricing.

Reference no: EM131458119

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