The relationship that gives the price of a call option in terms of the price of a put option plus the price of the underlying, non-dividend paying share minus the present value of the exercise price is known as
A)dividend exclusion.
B)limit law.
C)put option equality.
D)put-call parity.

Question

Quizplus · Accepted Answer

The relationship described in the question is known as put-call parity, which states that the price of a European call option is equal to the price of a European put option plus the present value of the exercise price, minus the current price of the underlying asset. This relationship holds only for European options on non-dividend paying stocks.

The Relationship That Gives the Price of a Call Option