Question: Enter a True or False. Explain your choice. 1. The replicating portfolio for a long European call option always involves a long position in the

Enter a True or False. Explain your choice.

1. The replicating portfolio for a long European call option always involves a long position in the stock and borrowing from the risk-free asset.

2, The Black-Scholes price of a European option depends on the mean rate of return on the underlying stock.

3. You have sold a European put option and are hedging it by managing a replicating portfolio. If the stock price goes up, then you should change your stock holdings in the replicating portfolio by buying some stock.

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