Wilmott's Theorem

Wilmott's Theorem states that in certain financial models, the price of an option (a financial contract giving the right to buy or sell an asset) can be represented as an average of its possible future payoffs, weighted by the likelihood of those outcomes occurring under specific assumptions. Essentially, it links the current option price to a weighted sum of potential future values, simplifying complex calculations. This theorem helps traders and analysts understand how various factors influence option pricing and assists in assessing risk and valuation more systematically.