Suppose you purchase a call and write a put on the same stock with the same exercise price and expiration.If prices are at equilibrium the value of this portfolio is ________. A) S₀ - Xe^-rt B) S₀ - X C) S₀ + Xe^-rt D) S₀ + X

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Quizplus · Accepted Answer

This is a synthetic long stock position, known as a "fiduciary call," which is equivalent to holding the stock and borrowing the present value of the exercise price. The value is S₀ - Xe^-rt.

Suppose You Purchase a Call and Write a Put on the Same