Put-Call Parity Relationship: The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the underlying stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C = S + P - PV(k).

 

Related Words

Put-Call Parity Relationship: The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the underly . . . View Full Definition

Principal-Agent Relationship: Occurs when one person, an agent, acts on the behalf of another person, the principal.

Purchasing Power Parity: The notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies.

Price-Volume Relationship: A relationship espoused by some technical analysts that signals continuing rises or falls in security prices that are related to changes in volume traded.