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LOS a: Calculate and interpret the prices of a synthetic call option, synthetic put option, synthetic bond, and synthetic underlying stock, and infer why an investor would want to create such instruments. ffice ffice" />
Q1. Referring to put-call parity, which one of the following alternatives would allow you to create a synthetic riskless pure-discount bond?
A) Buy a European put option; sell the same stock; sell a European call option.
B) Buy a European put option; buy the same stock; sell a European call option.
C) Sell a European put option; sell the same stock; buy a European call option.
Correct answer is B)
According to put-call parity we can write a riskless pure-discount bond position as:
X/(1+Rf)T = P0 + S0 – C0.
We can then read off the right-hand side of the equation to create a synthetic position in the riskless pure-discount bond. We would need to buy the European put, buy the same underlying stock, and sell the European call.
Q2. Referring to put-call parity, which one of the following alternatives would allow you to create a synthetic European call option?
A) Buy the stock; sell a European put option on the same stock with the same exercise price and the same maturity; short an amount equal to the present value of the exercise price worth of a pure-discount riskless bond.
B) Buy the stock; buy a European put option on the same stock with the same exercise price and the same maturity; short an amount equal to the present value of the exercise price worth of a pure-discount riskless bond.
C) Sell the stock; buy a European put option on the same stock with the same exercise price and the same maturity; invest an amount equal to the present value of the exercise price in a pure-discount riskless bond.
Correct answer is B)
According to put-call parity we can write a European call as: C0 = P0 + S0 – X/(1+Rf)T
We can then read off the right-hand side of the equation to create a synthetic position in the call. We would need to buy the European put, buy the stock, and short or issue a riskless pure-discount bond equal in value to the present value of the exercise price.
Q3. Referring to put-call parity, which one of the following alternatives would allow you to create a synthetic stock position?
A) Sell a European call option; buy a European put option; short the present value of the exercise price worth of a riskless pure-discount bond.
B) Buy a European call option; short a European put option; invest the present value of the exercise price in a riskless pure-discount bond.
C) Buy a European call option; buy a European put option; invest the present value of the exercise price in a riskless pure-discount bond.
Correct answer is B)
According to put-call parity we can write a stock position as: S0 = C0 – P0 + X/(1+Rf)T
We can then read off the right-hand side of the equation to create a synthetic position in the stock. We would need to buy the European call, sell the European put, and invest the present value of the exercise price in a riskless pure-discount bond.
[此贴子已经被作者于2009-3-28 15:36:13编辑过] | 
发表于 2009-3-28 15:25
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