Question: Why does the put-call parity relationship only come close to holding, but not predict the exact price? A.In practice, excessive amounts of arbitrage weakens the
Why does the put-call parity relationship only come close to holding, but not predict the exact price?
A.In practice, excessive amounts of arbitrage weakens the strength of the relationship.
B.European-style options add complexities not present in American-style options.
C.Transaction costs cause the prices to be slightly different from the prediction.
D.The put-call parity relationship is a theoretical finding which cannot be expected to hold in practice.
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
