It Is Possible to Replicate an Investment in a Call

question 74

True/False

It is possible to replicate an investment in a call option by a levered investment in the underlying asset.

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Definitions:

Nonexcludable

A characteristic of a good or service that prevents individuals from being effectively excluded from its use or benefits.

Free-rider Problem

A situation in which individuals consume more than their fair share or pay less than their fair share of the cost of a shared resource.

Public Good

A good that is non-excludable and non-rivalrous, meaning its consumption by one individual does not reduce its availability to others.

Common Resource

A resource like air or water that is not owned by anyone, but can be used by everyone, often leading to overuse and depletion.