put-call-parity

Learning objectives: Define a volatility smile and volatility skew. Explain the implications of put-call parity on the implied volatility of call and put options. Compare the shape of the volatility smile (or skew) to the shape of the implied distribution of the underlying asset price and to the...

We can synthesize stock ownership with a synthetic forward plus cash: S(0) = (c-p) + K*exp(-rT). That's put-call parity! My memorization mnemonic is "call plus cash equals protective put:" c + K*exp(-rt) = p + S(0) David's XLS is here...

Learning objectives: Explain put-call parity and apply it to the valuation of European and American stock options. Explain the early exercise features of American call and put options. Questions: 726.1. The price of a dividend-paying stock is $44.00 while the riskfree rate is 3.0%. Consider a...