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Put-Call Parity (Part I): CNBC Explains

Sunday, 29 May 2011 | 12:00 AM ET

Put-call parity demonstrates the relationship between shorts, puts, calls and bonds. The proper combination of each can yield equal payouts. This relationship is valuable to know for investors who can identify when the put-call parity is out of sync, taking advantage of arbitrage opportunities. Salman Khan of the Khan Academy explains.