# Derivatives - Derivatives Section 2

>>>>>>>>Derivatives Section 2

• A

Analyst 1.  • B

Analyst 2.  • C

Both.  • 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.

• A

Long call, short bond, long asset.  • B

Short call, short bond, long asset.  • C

Long call, long bond, short asset.  • 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.

• Option : A
• Explanation : According to put-call-forward parity, the put price plus the value of a riskfree bond with face value equal to the forward price equals the call price plus the value of a risk-free bond with face value equal to the exercise price.

• A

standard deviation of the underlying.  • B

difference between the up and down factors.  • C

ratio of the underlying value to the exercise price.  • 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.

• Option : C
• Explanation : The actual probabilities of the up and down moves are irrelevant to pricing options.
Related Quiz.
Derivatives Section 2