Explain why the put call parity relationship above does not hold in the case of American options on non dividend paying shares European options on dividend paying shares Company X issues 3 month European call options on its own shares with a strike price of 120p They are currently priced at 30 pence per share The current share price is 123p and the current force of interest is 6 pa

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Question: Explain why the put-call parity relationship above does not hold in the case of: American options on non-dividend-paying shares. European options on dividend-paying shares. Company

Explain why the put-call parity relationship above does not hold in the case of:

American options on non-dividend-paying shares.
European options on dividend-paying shares.

Company X issues 3-month European call options on its own shares with a strike price of 120p. They are currently priced at 30 pence per share. The current share price is 123p and the current force of interest is = 6% pa .

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