Define: Put/Call Parity

UK Accounting Glossary

Definition: Put/Call Parity



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Full Definition of Put/Call Parity


Put/Call Parity is a principle referring to the static price relationship, given a stock’s price, between the prices of European put and call options of the same class (i.e. same underlying, strike price and expiration date).

This relationship is shown from the fact that combinations of options can create positions that are the same as holding the stock itself. These option and stock positions must all have the same return or an arbitrage opportunity would be available to traders.

Any option pricing model that produces put and call prices that don’t satisfy put-call parity should be rejected as unsound because arbitrage opportunities exist.


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Definition Sources


Definitions for Put/Call Parity are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd March 2020.