Risk-neutral pricing – Hull and White debate Kenyon and Green
Lloyds Banking Group's Chris Kenyon and Andrew Green argued in Risk last month that regulatory-compliant pricing cannot be risk neutral. John Hull and Alan White are not completely convinced
John Hull and Alan White: Risk neutrality stays
The article written by Chris Kenyon and Andrew Green in the last issue of Risk, Regulatory costs break risk neutrality, is a refreshingly clearly written article, and we agree with much of it. There is certainly not a single risk-neutral measure for all market participants, and never has been. Pre-crisis, commercial and investment banks were regulated differently from each other. The attractiveness of a derivatives transaction to a market
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