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Spot–future parity (or spot-futures parity) is a parity condition whereby, if an asset can be purchased today and held until the exercise of a futures contract, the value of the future should equal the current spot price adjusted for the cost of money, dividends, "convenience yield" and any carrying costs (such as storage).
The intrinsic value is the difference between the underlying spot price and the strike price, to the extent that this is in favor of the option holder. For a call option, the option is in-the-money if the underlying spot price is higher than the strike price; then the intrinsic value is the underlying price minus the strike price.
Spot futures parity: The current price of a stock equals the current price of a futures contract discounted by the time remaining until settlement: S = F e − r T {\displaystyle S=Fe^{-rT}} Put call parity : A long European call c together with a short European put p at the same strike price K is equivalent to borrowing K e − r T ...
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Put–call parity is a static replication, and thus requires minimal assumptions, of a forward contract.In the absence of traded forward contracts, the forward contract can be replaced (indeed, itself replicated) by the ability to buy the underlying asset and finance this by borrowing for fixed term (e.g., borrowing bonds), or conversely to borrow and sell (short) the underlying asset and loan ...
When in equilibrium, and when interest rates vary across two countries, the parity condition implies that the forward rate includes a premium or discount reflecting the interest rate differential. Forward exchange rates have important theoretical implications for forecasting future spot exchange rates.
Switching spot and strike also switches these conventions, and spot and strike are often complementary in formulas for moneyness, but need not be. Which convention is used depends on the purpose. The sequel uses call moneyness – as spot increases, moneyness increases – and is the same direction as using call Delta as moneyness.
A man in Idaho was accused of using a fake barcode to shop at Walmart.. In a news release Monday, the Caldwell Police Department said officers responded to reports of a theft in progress at a ...