Consider both a European put and call that expire in June and have a strike price of $30.The no-arbitrage relationship between this put and call is referred to as which one of the following?
A)intrinsic equilibrium
B)Euro-match
C)bull-call spread
D)butterfly spread
E)put-call parity

Question

Quizplus · Accepted Answer

The no-arbitrage relationship between a European put and call with the same strike price and expiration date is referred to as put-call parity. This relationship implies that the price of a European call option plus the present value of the strike price equals the price of a European put option plus the current stock price. This relationship holds for all stocks that have a dividend yield of zero and no arbitrage opportunities exist if there is a violation of put-call parity.

Consider Both a European Put and Call That Expire in June