Put-Call Parity
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Option Pricing Fundamentals. 13 min read, ~2,006 words.
Parity (European, non-dividend):, equivalently. Find a missing price:, or. Always discount the strike to its present value, never the raw. Synthetic positions: any one of {C, P, S, bond} equals a combination of the other three. Violations create riskless arbitrage; profit equals the absolute difference between the two sides.
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 6d
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