Chartered Financial Analyst Level 1
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Which of the following statements is most accurate regarding a call option replication strategy?
A
The strategy necessitates adjustments throughout the option's life based on the probability of exercise.
B
If the call option is exercised, the strategy involves selling the underlying asset and using the proceeds to repay the loan.
C
At inception, the strategy entails entering into a long forward contract on the underlying and borrowing at the risk-free rate.