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A forward contract is a contract to purchase an asset at a fixed price on a particular date in the future (=expiration date). Both parties
A forward contract is a contract to purchase an asset at a fixed price on a particular
date in the future (=expiration date). Both parties are obligated to fulfill the contract.
Explain how to construct a forward contract on a share of stock from a position in
options. Hint: you will need 1 call and 1 put option. Plot the payoff diagram (Option
payoff as a function of share price).
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