The expectations approach to option valuation uses risk-neutral probabilities rather than actual probabilities or investor beliefs. This approach:

• Discounts expected payoffs using the risk-free rate
• Uses risk-neutral probabilities that adjust for risk preferences
• Ensures the option price is consistent with no-arbitrage conditions
• Does not rely on investor's subjective beliefs about future price movements

Option C is incorrect because the expectations approach specifically avoids using investor beliefs and instead uses risk-neutral probabilities derived from market prices.