In put-call parity for caps and floors, which of the following is true?
A) Long cap plus long floor equals swap
B) Long cap plus swap equals short floor
C) Long cap equals long floor plus swap
D) Long cap minus long floor equals swaption

Question

Quizplus · Accepted Answer

Put-call parity for caps and floors states that the present value of the cap minus the present value of the floor is equal to the present value of receiving fixed rate payments in a swap. Therefore, long cap equals long floor plus swap. Option A and B are incorrect as they do not include both a cap and a floor, and option D is incorrect as it relates to a swaption rather than a cap and floor.

In Put-Call Parity for Caps and Floors, Which of the Following