Briefly Explain What Is Meant by Put-Call Parity

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The Answer is The relationship between the value of a European call option and the value of an equivalent put option is called put-call parity. It shows that the payoff from purchasing a call option, and investing the present value of its exercise price, equals the payoff from buying the stock and buying a put option on the stock. Since these two payoffs at expiration are equal, it must cost the same to establish both positions. This equivalence in cost to establish the positions is called put-call parity.

Briefly Explain What Is Meant by Put-Call Parity

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