stock and put zero coupon and call

Then one could purchase (go long) the cheaper portfolio and sell (go short) the more expensive. Mathematics professor Vinzenz Bronzin also derives the put-call parity in 1908 and uses it as part of his arbitrage argument to develop a series of mathematical option models under a series of different distributions. Figure 7 Short Asset Long Call Payoff Figure 7 is the payoff of the combined position of a short asset and a long call. Asking questions such as what happens when the asset is less than, etc will make the diagrams clear. Thus the combined position of a short asset and a long call option is called a synthetic long put option since both have the same profit diagrams.

Some zero-coupon bonds are issued as such, while others are bonds that have been stripped of their coupons by a financial institution and then repackaged as zero-coupon bonds. That suggests that in this case the profit is the payoff plus a positive amount. However, adding a bond to a position does not change the profit. Synthetic put and call Just a couple of more observations to make about synthetic put and synthetic call. If a corporate bond is issued at a discount, this means investors can purchase the bond below its par value. Thus one way to read the equation is that a portfolio that is long a call and short a put is the same as being long a forward. Figure 8 Short Asset Long Call Profit Figure 8 is the profit of short asset long call. This is the present value factor for. The difference between the purchase price and the par value represents the investor's return. The cost of the long asset is, the future value of the price paid at time.