Put-call parity

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In financial mathematics, put–call parity defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a portfolio of a long call option and a short put option is equivalent to (and hence has the same value as) a single forward contract at this strike price and expiry. This is because if the price at expiry is above the strike price, the call will be exercised, while if it is below, the put will be exercised, and thus in either case one unit of the asset will be purchased for the strike price, exactly as in a forward contract.

[math]S + P = C + \dfrac {K} {1+RFR^t}[/math]



In a party, SiP a CoKe, add one Raspberry Flavored Rum topped it with a shot of tequila

party Put-call parity
SiP a CoKe Stock price
Put option
Call option
StriKe price
(1+RFR)t 1+Raspberry Flavored Rum topped with a shot of tequila

PV of Strike Price K = K/(1+RFR)t


party CoKe PepSi

party Put-call parity
CoKe PepSi Call option
StriKe price
Put option
Stock price

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