Digital Options Can Be Used to Synthetically Create a Position

question 42

Multiple Choice

Digital options can be used to synthetically create a position in a zero coupon bond by

• A) purchasing a cash-or-nothing digital put and selling an asset-or-nothing digital call
• B) purchasing both a cash-or-nothing digital call and a cash-or-nothing digital put
• C) purchasing both an asset-or-nothing digital call and an asset-or-nothing digital put
• D) purchasing a cash-or-nothing digital call and selling a cash-or-nothing digital put
• E) purchasing an asset-or-nothing digital call and selling an asset-or-nothing digital put

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Definitions:

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