Finance Assignment Help With Put Call Parity

11.6.3 Put call Parity

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Next we look at the relationship between call and put options. A fiduciary call is defined as a European call option plus a risk-free bond that matures on the expiration day and has a face value equal to the exercise price. We also look at the value of a protective put which is a European put plus the underlying asset. We show in the table below that the payoff from a fiduciary call and a protective put is the same whether the underlying price is above or below the exercise price at expiry.

put call parity

Value at expiration

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