Put-call parity on FWD, could some guys explain a synthetic call option is rearranged as C=P- (x-F(0,t) /(1+Rf) Since X< F(0,t) , why the answer is short bond position? Aslo i found this Q in 08Mock PM Q50, but given the opposite answer?
No response yet?
I think the “x” is the bond. So: C=P- (x-F(0,t) /(1+Rf) means that a call option= a long put minus (long zero-coupon bond at PV - long forward option at PV) and taking away the parenthesis: Call=Long put - long zero-coupon bond + long forward position. And since subtracting a long zero-coupon bond is the same as being a short a zero-coupon bond, the call option=being long a put, short a bond, long a forward.