# 9. Put-Call Parity

## l. explain put-call parity for European options;

What is the option strategy referred to as a fiduciary call? A fiduciary call consists of a European call and a risk-free bond that matures on the option expiration day and has a face value (X) equal to the exercise price of the call.

What is the option strategy referred to as a protective put? A protective put consists of a European put and the underlying asset.

What is put-call parity? The put and call must have the same underlying, exercise price and expiration date.

What is a synthetic call? A synthetic call consists of a long put, a long position in the underlying, and a short position in the risk-free bond.

What is a synthetic put? A synthetic put consists of a long call, a short position in the underlying, and a long position in the risk-free bond.

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CFA

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- 115.080.02 Derivatives - Reading 49 - Basics of Derivative Pricing and Valuation to 115.080.02.09 - Reading 49 - 9. Put-Call Parity