If an actual put option premium is less than what is suggested by the put-call parity relationship, arbitrage can be conducted.

Question

Quizplus · Accepted Answer

Put-call parity is a theoretical relationship between the prices of call and put options. If the actual put option premium is less than what is suggested by put-call parity, this creates an arbitrage opportunity for traders to buy the put option and sell the corresponding call option, making a risk-free profit. Therefore, the statement is true.

If an Actual Put Option Premium Is Less Than What