A portfolio consists of a long 55 put and a short 50 put. Show how to replicate
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A portfolio consists of a long 55 put and a short 50 put. Show how to replicate this portfolio using stocks and calls. Comparing the payoff graphs of the two puts, which put has greater value no matter what the stock price (i.e. is more expensive to buy)? Same question for the replicating calls.
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To replicate the portfolio consisting of a long 55 put and a short 50 put using stocks and calls we can use the concept of synthetic options Synthetic ...View the full answer
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