We should 1 long one share of stock 2 short one call

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Unformatted text preview: 5% 12 − 44 ⋅ e − 3 × 5% 12 ! Part (b)! ! K ⋅ e− rT = S0 − PV ( Div ) − C ( K , T ) + P ( K , T ) ! ! C ( K , T ) − P ( K , T ) = S0 − PV ( Div ) − K ⋅ e− rT ! ! ! ! ! ! Therefore, in order to create a treasury bill with face value of K=44,! we should:! (1)! Long one share of Stock! (2)! Short one Call! (3)! Long one Put! ! As such, to create a synthetic treasury bill with face value of 100,! ! we should buy stock of share ! sell 2.272727 shares of calls, and buy 2.272727 shares of puts.! ! 100 ≈ 2.272727 ,! 44 Page 2 of 3 STAT 473! HW 1 Solution 6.! ! ! C ( K ,...
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This document was uploaded on 02/17/2014 for the course STAT 473 at Purdue University-West Lafayette.

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