- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 9. Option Replication Using Put-Call Parity
- Subject 1. Put-Call Parity
CFA Practice Question
Which positions should be taken to create a short synthetic position in a European put option for a stock per put-call parity equation?
B. Short call, long stock, short bond.
C. Long call, short stock, long bond.
A. Long call, long stock, short bond.
B. Short call, long stock, short bond.
C. Long call, short stock, long bond.
Correct Answer: B
As per put-call parity equation, the short position in a put option can be created by shorting the call, shorting the bond, and taking long in the stock.
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