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What should be the strike price of the put option

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Reference no: EM132801334

Question - Consider a call option written on stock XYZ with a strike price of $100. The call option expires one year after from today.

a) How would you replicate an ownership of this call option using the underlying stock, a put option, and the risk free bond? Explain

b) What should be the strike price of the put option and the face value of the risk free bond in the replicating portfolio? What should be the maturity of the bond?

Reference no: EM132801334

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