A long position in a synthetic option. In other words, a position whose payoff (and generally risk-and-reward profile) replicates that of a long option. This option which is synthetically constructed by buying the underlying asset and borrowing, without buying the option being replicated. For example, the risk of a short option position can be hedged by constructing a long synthetic option. This would involve creating a portfolio that replicates the same payoff of the short option.
Derivatives
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