risk-neutral-probabilities

One of the harder ideas in fixed income is risk-neutral probabilities. In this video, I'd like to specifically illustrate, and define, what we mean by risk-neutral probabilities. I will do this in three steps. The first one is just a simple example of a coin toss, where my objective is to...

In the discussion associated with our T5-40 question at old https://forum.bionicturtle.com/threads/l2-t5-40-replicating-callable-bond-tuckman.3551/post-78646 @Sixcarbs asked for a fresh situation (same mechanics but simply with different but coherent numbers). Here is what I've come up with...