- Option : A
- Explanation : Put-call parity is given by: long stock + long put = long call + risk-free zero coupon bond. Hence a risk-free zero coupon bond (a risk-free position) can be created as follows: long stock + long put + short call.

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57. Which of the following transactions is the equivalent of a synthetic long put position?

- Option : C
- Explanation : Put-call parity is given by: long stock + long put = long call + long bond. Hence a synthetic put can be created as follows: long call + long bond – short stock.

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59. In a binomial model, the volatility of the underlying is directly represented by the:

- Option : B
- Explanation : The up and down factors express how high and how low the underlying can go. Standard deviation does not appear directly in the binomial model, although it is implicit.

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60. Which of the following statements is most accurate? In a binomial model:

- Option : C
- Explanation : The actual probabilities of the up and down moves are irrelevant to pricing options.

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