Home / Glossary / Put–Call Parity

Put–Call Parity

A no-arbitrage link between calls, puts, the stock, and a bond.

Holding a call and writing a put (same strike/expiry) replicates a forward on the stock. Any violation is a riskless arbitrage, which is why the relationship holds tightly in liquid markets. It lets you derive a put price from a call and vice versa.

C − P = S − K·e^(−rT)