CFA Practice Question

There are 227 practice questions for this study session.

CFA Practice Question

If the underlying stock price goes up, the replicating strategy for calls requires ______.
A. short selling more shares
B. buying more shares
C. doing nothing
Explanation: If S goes up, both d1 and d2 will go up, and both N(d1) and N(d2) will go up. The replicating strategy for calls requires buying more shares (long N(d1) and short selling more bonds to replicate the option payoffs.

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