Explanation

According to put-call-forward parity, a fiduciary call (which consists of a long call option plus a risk-free bond) is equivalent to a protective put on a forward contract. The specific relationship is:

Fiduciary Call = Long Call + Risk-Free Bond = Long Forward + Long Put

However, looking at the options provided:

• Option A: "a long call and a long risk-free asset" - This is actually the definition of a fiduciary call itself, not what it's equal to according to put-call-forward parity.

• Option B: "a long call, a short forward and a long risk-free bond" - This is the correct representation. According to put-call-forward parity, a fiduciary call (long call + risk-free bond) can be replicated by a long call, short forward, and long risk-free bond.

• Option C: "a long forward, a short call and a short risk-free bond" - This is incorrect as it represents a different position.

Key Relationships in Put-Call-Forward Parity:

1. Fiduciary Call = Protective Put on Forward

   • Long Call + Risk-Free Bond = Long Forward + Long Put

2. Rearranging the equation:

   • Long Call + Risk-Free Bond = Long Forward + Long Put
   • This can be rearranged to show that a fiduciary call can be created through various combinations.

The correct answer is B because it accurately represents one of the equivalent positions to a fiduciary call according to put-call-forward parity relationships.