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A risk-neutral probability (in Quantitative Finance) is a probability measure in which, on average, all the risky assets return the risk-free rate. Risk-neutral probabilities are widely used for the pricing of derivative products. There are other advanced mathematical definitions of a risk-neutral probability that won’t be discussed here.
In R package ahead, it is possible to obtain simulations of risky assets returns both in historical and risk-neutral probability.
Table of contents
0 – Install ahead
1 – Get and transform data
2 – Risk-neutralize simulations
3 – Visualization
0 – Install ahead
ahead is released under the BSD Clear license. Here’s how to install the R version of the package: