Answer: long call + long risk-free bond + short forward

## Explanation Put-call-forward parity establishes the relationship between European put and call options, risk-free bonds, and forward contracts. The parity relationship states that: **Long Put = Long Call + Long Risk-Free Bond + Short Forward** This can be derived from the basic put-call parity formula: **P + S = C + PV(K)** Where: - P = Put option price - S = Spot price of underlying asset - C = Call option price - PV(K) = Present value of strike price (risk-free bond) Rearranging: **P = C + PV(K) - S** In forward contract terms, a short forward position is equivalent to -S (since forward price F = S × (1+r)^T). Therefore: **P = C + PV(K) + Short Forward** This corresponds to option C: **long call + long risk-free bond + short forward**. ### Why the other options are incorrect: - **Option A (short call + short risk-free bond + long forward)**: This would create a synthetic short put position, not a long put. - **Option B (short call + long risk-free bond + short forward)**: This combination doesn't create a synthetic long put position according to put-call-forward parity. ### Key Concept: Put-call-forward parity is an extension of put-call parity that replaces the spot position with a forward contract. It's particularly useful when dealing with forward contracts rather than spot positions.

Author: LeetQuiz .