Answer: Long a call, long a risk-free bond, and short a put

## Explanation A fiduciary call is a combination of: 1. **Long a call option** 2. **Long a risk-free bond** (with face value equal to the exercise price) 3. **Short a put option** This position is equivalent to a **protective put** (long underlying asset + long put option) through **put-call parity**. ### Put-Call Parity Relationship: The put-call parity formula is: **C + PV(X) = P + S** Where: - C = Call option price - PV(X) = Present value of exercise price (risk-free bond) - P = Put option price - S = Underlying asset price Rearranging the formula: **C + PV(X) - P = S** This shows that: - **Long call + Long bond + Short put = Long underlying asset** Therefore, a fiduciary call (long call + long bond + short put) is equivalent to owning the underlying asset, which is the same payoff as a protective put strategy. ### Why Option B is Correct: - **Option A** (Long call + Long bond) is incomplete - it's missing the short put position - **Option B** correctly includes all three components: long call, long bond, and short put - **Option C** (Long call + Short underlying + Long bond) is incorrect because it involves shorting the underlying asset, which is not part of a fiduciary call ### Key Takeaway: A fiduciary call is a synthetic position that replicates owning the underlying asset using options and a risk-free bond, based on the put-call parity relationship.

Author: LeetQuiz .