Hi everyone, I have some questions on replication.
Asset + Derivative = Risk Free Rate
Asset - Risk Free Rate = - Derivative
Derivative - Risk Free Rate = - Asset
For the first equation, if I am long asset, I would need to be long put to have a riskless position?
For the second equation, if I am long asset, I would need to borrow at the risk free rate in order to replicate a short put?
For the third equation, I would need to borrow at the risk free rate and buy a call to replicate a short position in an asset?
Are my statements above accurate? What does the negative derivative mean? Does it mean we are going short?
Thank you