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Up1
A synthetic long position in a riskless bond is created by combining:
- A. a long position in a put, a long position in the underlying, and a short
position in the call. - B. a long position in a call, a long position in the underlying, and a
short position in the put. - C. a short position in a put, a short position in the underlying, and a
long position in the call.
- A. a long position in a put, a long position in the underlying, and a short
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Up5
The correct answer is A.
A synthetic
long position in a riskless bond is
created by combining a long position in a put, a long position in the
underlying, and a short position in a call.Put-call parity:
p0 + S0 = c0 + X/(1 + r)^T
X/(1+r)^T
= p0 + S0 – c0 -
Up1
Just to confirm, wouldn’t combining the three positions make a “super-concentrated” long position on the bond? Not that it breaks the question, just wanted to clarify.
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Up0mincemeat23 said:Just to confirm, wouldn’t combining the three positions make a “super-concentrated” long position on the bond? Not that it breaks the question, just wanted to clarify.
A super-concentrated long position in the underlying (not the bond) would be created by going long the underlying, long a call, and short a put. Not sure if that answers your question, but if you need more clarification, we’re always here to help!
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