Tag Archive for 'Put-call parity relationship'

Put-call parity relationship

Put-call parity relationship

Put-call parity relationship

The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C=S+P-PV(k).



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