PUT–CALL PARITY

PUT–CALL PARITY an important relationship between the prices of European put and call options that have the same strike price and time to maturity.

Portfolio A: one European call option plus a zero-coupon bond that provides a payoff of K at time T

Portfolio C: one European put option plus one share of the stock.

We continue to assume that the stock pays no dividends. The call and put options have the same strike price K and the same time to maturity T.

CAPM

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s