In the context of the Black-Scholes option pricing formula, show that Cput = Ccall + Ke-rt - S0

Question

Question

In the context of the Black-Scholes option pricing formula, show that C_put = C_call + Ke^-rt - S₀

Answer 1

Answer #1

Put-call parity We consider a relationship between the prices of European call and put options. Claim Let p be the price of a

Proof Compare Portfolio A: one American call and K EUR in cash Portfolio B: one American put and one share The worth of both

hence for no arbitrage , cal put parity must hold

hence C_put = C_call + Ke^-rt - S₀

Answer 2

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