The concept of synthetic replication is central to understanding how derivative securities are priced. Required: (in no more than 250 words) Explain exactly what is meant by synthetic replication. Write a clear explanation of how synthetic replication is relevant to the valuation of derivatives. In this part of the question you must give a clear definition of replication and some general discussion about how synthetic replication affects the prices of derivatives in the market. (2 marks) Using either (i) forward/futures contracts or (ii) option contracts give one explicit numerical example of synthetic replication and how the price of the derivative security is related to the synthetically replicated portfolio. You only need to use one example. You must write in your own words and address the principles of synthetic replication for the derivative security you have chosen for your illustration. (2 marks) This question must be written in your own words and show that you understand the concept of synthetic replication as it relates to the pricing of derivative contracts. Do not copy answers from elsewhere