If you need three securities to hedge three factors, can you do the follow- ing? Take two securities and make a third "synthetic" security from these two (i.e. it is the average of both prices). Use it to solve the system of equations. Is this valid?

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The Answer of If you need three securities to hedge three factors, can you do the follow- ing? Take two securities and make a third "synthetic" security from these two (i.e. it is the average of both prices). Use it to solve the system of equations. Is this valid?

If You Need Three Securities to Hedge Three Factors, Can