Synthetic replication

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Synthetic replication is the process by which a financial asset's payoff is exactly replicated by trading other securities.[1]

For instance Black Scholes theory claims vanilla option pricing can be achieved through the use of stock and zero coupon bond.

[edit] References

  1. ^ T. Daniel Coggin, Frank J. Fabozzi (1998). Applied Equity Valuation. John Wiley and Sons. ISBN 1883249511. 
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