Put-call parity suggests that
A) the sum of the prices of a stock and a call equal zero
B) the sum of the prices of a put and a call equal zero
C) the sum of the prices of a stock, a call, a put, and a bond equal zero
D) sum of the prices of a stock and a put must equal the sum of the prices of a call and a discounted bond with the maturity date as the expiration date of the options

Question

Quizplus · Accepted Answer

Put-call parity is an important concept in options trading that suggests that the sum of the prices of a stock and a put must equal the sum of the prices of a call and a discounted bond with the maturity date as the expiration date of the options. This relationship is based on the idea that the value of a call option (which gives the holder the right to buy a stock at a certain price) is essentially the same as the value of a put option (which gives the holder the right to sell a stock at a certain price) plus the value of a bond that pays a fixed rate of interest until the option expires. Therefore, choice D is the correct answer.

Put-Call Parity Suggests That