Chapter 03 · Section 3.1
Distribution
The first distribution (green line) is used for the calculation of the fair value of a call with a strike of 40 and an underlying currently at 45.
Which of the two other distributions corresponds to an underlying currently at 35
a) The flat, yellow, curve
b) The pink, left shifted curve
One can safely suppose that future underlying values have a higher probability when they are close to the current underlying value than when they are far away from it.
One should also expect that the probability distribution shows a maximum for the current underlying value.