Put-call-futures parity is the relationship between the prices of puts, calls, and futures on an asset. Assuming a constant risk-free rate and European options, which of the following correctly expresses the relationship of put-call-futures parity?
A) Pe(S0,T) = Ce(S0,T) + (X - f0(T))(1 + r)-T
B) Pe(S0,T,X) = Ce(S0,T) - (X - f0(T))(1 + r)-T
C) Pe(S0,T,X) = Ce(S0,T,X) + (X - f0(T))(1 + r)-T
D) Pe(S0,T,X) = Ce(S0,T,X)(X - f0(T))(1 + r)-T
E) none of the above

Question

Quizplus · Accepted Answer

Put-call-futures parity states that the price of a European put option (Pe) is equal to the price of a European call option (Ce) with the same strike price (X) and expiration date (T) plus the present value of the difference between the strike price and the futures price (f0(T)). The correct formula is: Pe(S0,T) = Ce(S0,T) + (X - f0(T))(1 + r)-T

Put-Call-Futures Parity Is the Relationship Between the Prices of Puts