Prove put-call parity for European compound options: C C + P P C P P
Question:
Prove put-call parity for European compound options:
CC + PP − CP − PC = S − E2e−r(T2−t),
where CC is a call on a call, CP is a call on a put, PC is a put on a call and PP is a put on a put. The compound options have exercise price E1 and expiry at time T1 and the underlying calls and puts have exercise price E2 and expiry at time T2.
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The putcall parity for European compound options can be derived by considering the following equatio...View the full answer
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