The Most Critical Assumption of Put-Call Parity Is That

question 61

Multiple Choice

The most critical assumption of put-call parity is that

• A) both options may have different exercise prices, but the same expiration dates
• B) both options have the same exercise prices and the same expiration dates
• C) both options will produce the same profit on the stock as well as a risky bond
• D) both options will produce the same profit on the stock as well as a risk-free bond
• E) both options will produce the same profit on the stock as well as another risky asset

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Definitions:

Clayton Act

A U.S. antitrust law enacted to prevent anti-competitive practices and promote fair competition.

Geographic Market

The defined area within which a company competes for customers, including factors of geography, demography, and economy.

Antitrust Law

Legislation aimed at preventing monopolies and promoting competition to protect consumers from unfair business practices.

Monopoly Power

is the ability of a single company or entity to control a significant portion of the market for a particular product or service, limiting competition.