Synthetic Long Put
The synthetic long put position consists of three elements: shorting one stock, holding one European call option and holding dollars in your bank account.
(Here is the strike price of the option, and is the continuously compounded interest rate, is the time to expiration and is the spot price of the stock at option expiration.)
At expiry you have to repay the stock, which gives a cashflow . The bank account will give a cashflow of dollars. Moreover, the European call gives a cashflow of . The total cashflow is . We see that the total cashflow at expiry is exactly the cashflow of a European put option.
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