Simultaneously buying both a bond and a put option on the bond produces the same payoff as buying a call option on the bond.

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Quizplus · Accepted Answer

This is known as the put-call parity relationship, which holds for European-style option contracts. It states that the sum of the discounted value of the bond and the price of a put option on the bond with the same strike price and expiration date is equal to the price of a call option on the bond with the same strike price and expiration date. Therefore, buying both a bond and a put option will result in the same payoff as buying a call option.

Simultaneously Buying Both a Bond and a Put Option on the Bond