The relationship between the call option price, the put option price, and the price of the underlying asset is knows as:
A) Risk/return relationship.
B) Put-call parity relationship.
C) Binomial relationship.
D) Arbitrage relationship.
E) None of the above.

Question

Quizplus · Accepted Answer

The put-call parity relationship is a fundamental concept in options pricing that connects the prices of European call and put options with the same strike price and expiration date to the current price of the underlying asset. This relationship helps in determining the fair price of options and in identifying arbitrage opportunities.

The Relationship Between the Call Option Price, the Put Option