Synthetic replication

Synthetic replication

Synthetic replication is the process by which a financial asset's payoff is exactly replicated by trading other securities. [citebook|title=Applied Equity Valuation|author=T. Daniel Coggin, Frank J. Fabozzi|year=1998|publisher=John Wiley and Sons|id=ISBN 1883249511]

For instance Black Scholes theory claims vanilla option pricing can be achieved through the use of stock and zero coupon bond.

References


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