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hw0799
05-07-2007, 04:37 PM
2003, 8v, q19, (b), first is to use surplus to buy put options. it equal to
S+P (as there is asset held)

2nd way, is to buy call option and invest in treaturies. Do we need to sell the asset, or just use the surplus to buy the call, and some surplus to invest in risk free asset? I doubt there will be enough surplus to do so.

if don't sell the asset, the portfolio equal to C+PV(K)+S, not make much sense... Thanks.