Which one of the following can be used to replicate a protective put strategy?
A)riskless investment and stock purchase
B)stock purchase and call option
C)call option and riskless investment
D)riskless investment
E)call option, stock purchase, and riskless investment

Question

Quizplus · Accepted Answer

A protective put strategy involves holding a stock and buying a put option to limit downside risk. This can be replicated by buying a call option and making a riskless investment (buying a bond), which together create a payoff equivalent to holding the stock and put option.

Which One of the Following Can Be Used to Replicate