Risk-neutral pricing – Hull and White debate Kenyon and Green

XVA specialists spark debate on regulation and risk-neutrality

John Hull and Alan White
John Hull and Alan White

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 participa