Question: Explain how an option can be created synthetically using the underlying stock and a riskless bond based on the concept of riskless hedge. What is

  1. Explain how an option can be created synthetically using the underlying stock and a riskless bond based on the concept of riskless hedge.
  2. What is meant by the delta of a stock option? How do you interpret a delta of 0?
  3. Why is delta positive for a call and negative for a put?

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