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 these.
E) none of these.

Question

Quizplus · Accepted Answer

The put-call parity theorem represents the proper relationship between put and call prices and if violated, allows for arbitrage opportunities. However, the violation may be small enough to not earn arbitrage profits once transaction costs are considered.

The Put-Call Parity Theorem