Question: QUESTION 3 Required: a ) Critically evaluate the terminal value of the following portfolio: a newly entered - into long forward contract on an asset

QUESTION

3

Required: a

)

Critically evaluate the terminal value of the following portfolio: a newly entered

-

into long forward contract on an asset and a long position in a European put option on the asset with the same maturity as the forward contract and a strike price that is equal to the forward price of the asset at the time the portfolio is set up

.

Prove that the European put option has the same value as a European call option with the same strike price and maturity. Illustrate your answer with figure.

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