Question: 1. Under which situation Put-Call Parity does NOT fail to hold Transaction costs are too high Markets are not well functioning Bid ask spread is

1. Under which situation Put-Call Parity does NOT fail to hold

Transaction costs are too high

Markets are not well functioning

Bid ask spread is pretty small

There are strong short selling restrictions

2.

Which statement is INCORRECT about hedge ratio

Hedge ratio for a call option is positive

Hedge ratio for a put option is positive

Hedge ratio for a put option is (Pu-Pd)/(U-D)*S

Hedge ratio for a call option is (Cu-Cd)/(U-D)*S

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