In Put-Call Parity for Caps and Floors, Which of the Following

question 12

Multiple Choice

In put-call parity for caps and floors, which of the following is true?

• A) Long cap plus long floor equals swap
• B) Long cap plus swap equals short floor
• C) Long cap equals long floor plus swap
• D) Long cap minus long floor equals swaption

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Definitions:

Upsloping Supply

Refers to a supply curve that slopes upwards, indicating that higher prices lead to a higher quantity supplied.

Excise Tax

A tax levied on specific goods or services, such as alcohol or gasoline, usually to discourage their consumption or to raise revenue for public purposes.

Commodity X

A placeholder term for a generic good or product in economic models.

Demand Equation

Is a mathematical representation that describes the relationship between the quantity demanded of a good or service and its price, among other factors.