Consider Both a European Put and Call That Expire in December

question 64

Multiple Choice

Consider both a European put and call that expire in December and have a strike price of $25.The no-arbitrage relationship between this put and call is referred to as which one of the following?

• A) intrinsic equilibrium
• B) Euro-match
• C) bull-call spread
• D) butterfly spread
• E) put-call parity

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Definitions:

Systematic Desensitization

A behavioral therapy technique used to reduce phobic responses and anxiety through gradual exposure to the feared object or situation.

Operant Conditioning

A training procedure by which behavior intensity is changed through reinforcement or punishment.

Modeling

A technique in psychotherapy where individuals learn by observing and imitating the behaviors of others.

Reinforcement

The process of encouraging or establishing a pattern of behavior by offering reward or punishment.