The put-call parity theorem
A)represents the proper relationship between put and call prices.
B)allows for arbitrage opportunities if violated.
C)may be violated by small amounts, but not enough to earn arbitrage profits, once transaction costs are considered.
D)All of the options
E)None of the options

Question

Quizplus · Accepted Answer

The put-call parity relationship states the relationship between put and call prices, which, if violated, allows for arbitrage profits; however, these profits may disappear once transaction costs are considered.

The Put-Call Parity Theorem