Question: Incorrect Question 2 0/1 pts 2. To create a synthetic riskless bond using options and stocks, one needs to Short a stock, short scall, and

 Incorrect Question 2 0/1 pts 2. To create a synthetic riskless

Incorrect Question 2 0/1 pts 2. To create a synthetic riskless bond using options and stocks, one needs to Short a stock, short scall, and short a put Short stock, short a call and long a put Long a stock short a put, and long a call of SCT)-Klong a stock will give you S(T), short a put will give you Olone a call will give you (1) K. So your total payoff at time will be 2"-K 1 STK. long a stock will give you S(T), short a put will give you - (K-51T), and long a call will give you . So your total payoff at time will be 28(7) K This is likelonging 2 forward contracts on teh stock with a forward price of K/2. tona stock short a calls and tongut

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!