- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 8. Pricing and Valuation of Options
- Subject 2. Arbitrage and Replication
CFA Practice Question
How can a synthetic long position in an asset be replicated using derivative and risk-free asset? A. Buying risk-free asset and selling derivative
B. Buying risk-free asset and buying derivative
C. Selling risk-free asset and buying derivative
Correct Answer: B
A synthetic position in an asset can be replicated by taking a long position in the risk-free asset and a long position in the derivatives.
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