Which of the following is equivalent to a long position in a European call option?
A) A short position in a cash-or-nothing put option plus a long position in an asset-or-nothing put option
B) A long position in an asset-or-nothing put option plus a long position in a cash-or-nothing put option
C) A long position in an asset-or-nothing call option plus a long position in a cash-or-nothing call option
D) A long position in an asset-or-nothing call option plus a short position in a cash-or-nothing call option

Question

Quizplus · Accepted Answer

A long position in a European call is equivalent to a long position in an asset-or-nothing call option (this is worth S₀N(d₁))and a short position in a cash-or-nothing call option (this is worth -Ke^-rTN(d₂))

Which of the Following Is Equivalent to a Long Position