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by eru
1964 days ago
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Not quite. It's the 'risk-free bond' term that I dropped from my explanation of the put call parity. To replicate the stock, you'd buy the call and sell the put. The risk exactly balances out in the sense that a total portfolio of 1 stock short, 1 call long and 1 put short would have zero risk and behave like a risk-free bond. (If the risk premia of the long call and the short put would not exactly balance, you could make money with very simple arbitrage trades.) |
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