A synthetic forward contract can be constructed by combining a long call with a short put on the same currency with exercise prices equal to the forward rate of exchange.

Question

Quizplus · Accepted Answer

This is true. By combining a long call with a short put on the same currency with exercise prices equal to the forward rate of exchange, an investor can replicate the payoff of a forward contract.

A Synthetic Forward Contract Can Be Constructed by Combining a Long