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Forward contract on an asset and a long european call option

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Reference no: EM131819585

Consider the following portfolio: a short forward contract on an asset and a long European call option on the same asset, with the same maturity as the forward contract and a strike price that is equal to the forward price of the asset at the time the portfolio is set up. The payoff of this portfolio resemble the payoff of a well-known derivative. Which one is it? Explain with the aid of a graph and by writing down the payoffs of the portfolio and its constituent elements.

Reference no: EM131819585

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