Put-Call Parity

Question 1

For a Non-Dividend Paying Stock

F^P_t,T(S) =

Answer 1

S_t

Question 2

For a Stock Paying Discrete Dividends

F^P_t,T(S) =

Answer 2

S_t - PV(Divs)

Question 3

For a Stock Paying Continuous Dividends

F^P_t,T(S) =

Answer 3

S_te^-δ(T-t)

Question 4

For a Non-Dividend Paying Stock

F_t,T(S) =

Answer 4

S_te^r(T-t)

Question 5

For a Stock Paying Discrete Dividends

F_t,T(S) =

Answer 5

S_te^r(T-t) - AV(Divs)

Question 6

For a Stock Paying Continuous Dividends

F_t,T(S) =

Answer 6

S_te^(r-δ)(T-t)

Question 7

What is the PCP for a Stock?

Answer 7

C - P = F^P_t,T(S) - Ke^-r(T-t)

Question 8

Given C(A,B)

Receive: ___

Give Up: ___

Answer 8

Given C(A,B)

Receive: A

Give Up: B

Question 9

Given P(A,B)

Receive: ___

Give Up: ___

Answer 9

Given P(A,B)

Receive: B

Give Up: A

Question 10

PCP for Exchange Options?

Answer 10

C(A,B) - P(A,B) = F^P_t,T(A) - F^P_t,T​(B)

Question 11

Exchange Option Duality

C(A,B) = _____

Answer 11

C(A,B) = P(B,A)

Question 12

PCP for Currency Options

What three substitutions do you make?

Answer 12

S₀ → x₀

r → r_d

δ → r_f

Note: x₀ is in the form d/f

Question 13

Currency Option Duality

_dC(x₀, K) =

_Note: _x₀ in the form d/f

Answer 13

_dC(x₀, K) = x₀ * K * _fP[(x₀)^-1, (K)^-1]

Note: x₀ in the form d/f

Question 14

PCP for Bonds

Answer 14

C - P = B_t - PV_t,T(Coupons) - Ke^-r(T-t)