Put-call parity suggests that the sum of the prices of a stock, a call and a put on that stock, and a debt instrument maturing at the expiration of the options must equal zero.

Question

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Put-call parity establishes a relationship showing that the price of a call option plus the present value of the strike price (as represented by a risk-free bond maturing on the option's expiration date) equals the price of a put option plus the current stock price. It does not suggest that their sum equals zero.

Put-Call Parity Suggests That the Sum of the Prices of a Stock