derivatives replication and call-put parity with repliation

CFA Level I
#1

hello everybody, with that u do well studying

i have 3 questions, i will be gratefull if someone clear them to me

1- the price of a derivative is tied to the price of the underlying. (curriculum statement)

how they build this assumptions?

2- Replication sataed that: Asset + Derivative = RFR, which is long asset + long derivative = long RFR, can someone clear this point with an example?

3- call-parity with forward stated that: Assets - derivative = Assets. ans this statement conflict with the above formula of replication.

#2

  1. I’m not sure how this is surprising to you. If you have a call option on a stock with a strike price of $20, it will be worth more when the spot price of the underlying is $30 than when the spot price of the underlying is $10.

  2. I assume that you mean a long position in the underlying asset and a short position in the forward contract (derivative). The result – earning the risk-free rate – is nothing more than an acknowledgement of the fact that you have a risk-free position: the exit price is guaranteed.

  3. I have no idea what you mean by this.