Is the Financial Market Risk-neutral -Empirical Research Based on the Implied Probability Distribution

Risk-neutral pricing theory is a powerful tool to solve the asset pricing problems in the financial market, but the theory is valid only when the financial market is risk-neutral. This paper takes the examples of stock market and stock option market, which are two important financial markets, to obtain the implied probability distribution via the risk-neutral pricing formula, and proposes a test method to verify whether the financial market is risk-neutral. As an application of this test method, this paper does empirical research on SSE 50 ETF market which is a emerging market in China.