DEFINITION of 'RiskNeutral Measures'
A theoretical measure of probability derived from the assumption that the current value of financial assets is equal to their expected payoffs in the future discounted at the riskfree rate. Another assumption made is that there is an absence of arbitrage. The term derives its name from the fact that all financial assets have the same expected rate of return  i.e., the riskfree rate.
Also known as equivalent martingale measure or Qmeasure.
INVESTOPEDIA EXPLAINS 'RiskNeutral Measures'
The concept of a riskneutral measure is used to price derivatives. The riskfree rate of return is the return on an investment where the theoretical risk is zero. In practice, the interest rate on threemonth U.S. Treasury bills is commonly used as a proxy for the riskfree rate.

Equivalent Martingale Measures
In asset pricing, a probability distribution of expected payouts ... 
RiskNeutral Probabilities
Probabilities of future outcomes adjusted for risk, which are ... 
Risk Tolerance
The degree of variability in investment returns that an individual ... 
RiskAdjusted Return
A concept that refines an investment's return by measuring how ... 
Risk Neutral
Indifference to risk. The riskneutral investor would be in the ... 
Risk Averse
A description of an investor who, when faced with two investments ...

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