|Put-call parity relationship|
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Definition of Put-call parity relationship
Put-call parity relationship
The relationship between the price of a put and the price of a call on the same
The sum of cash, accounts receivable, and short-term marketable
An option that gives the right to buy the underlying futures contract.
a. An option to buy a certain quantity of a stock or commodity for a
To exercise a call option.
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
Also called the broker loan rate , the interest rate that banks charge brokers to finance
An option contract that gives its holder the right (but not the obligation) to purchase a specified
A contract that gives the holder the right to buy an asset for a
Right to buy an asset at a specified exercise price on or before the exercise date.
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
A feature of some callable bonds that establishes an initial period when the bonds may not be
An embedded option granting a bond issuer the right to buy back all or part of the issue prior
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
A bond that allows the issuer to buy back the bond at a
Bond that may be repurchased by the issuer before maturity at specified call price.
computer-aided design (CAD)
a system using computer graphics for product designs
computer-aided manufacturing (CAM)
the use of computers to control production processes through numerically
computer integrated manufacturing (CIM)
the integration of two or more flexible manufacturing systems through the use of a host computer and an information networking system
Conversion parity price
Related:Market conversion price
A short call option position in which the writer owns the number of shares of the underlying
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
A put option position in which the option writer also is short the corresponding stock or has
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
A provision that prohibits the company from calling the bond before a certain date. During this
when the incremental revenue from the sale of reworked defective units is greater than
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
Expected return-beta relationship
Implication of the CAPM that security risk premiums will be
With CMOs, the start of the cash flow cycle for the cash flow window.
The level of output produced by the economy when operating at the natural rate of unemployment.
The right of the homeowner to prepay, or call, the mortgage at any time.
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
To assign a value to a good or service in place of a market value that is not available.
The value of consumption services obtained by owning one's house rather than having to pay rent.
a number (prefaced as a multiplier
Tables that indicate how much each industry requires of the production of each other
interest rate parity
Theory that forward premium equals interest rate differential.
Interest Rate Parity
Theory that real interest rates are approximately the same across countries except for a risk premium.
Interest rate parity theorem
Interest rate differential between two countries is equal to the difference
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
A demand for additional funds because of adverse price movement. Maintenance margin
net income (also called the bottom line, earnings, net earnings, and net
The difference between full employment output and current output.
A covenant allowing the bondholder to demand repayment in the event of a hostile merger.
Potential Output or Potential GDP
Output produced when the economy is operating at its natural rate of unemployment.
A relationship espoused by some technical analysts that signals continuing rises
A situation that can be modeled as one person, an agent, who acts on the behalf
Protective put buying strategy
A strategy that involves buying a put option on the underlying security that is
Provisional call feature
A feature in a convertible issue that allows the issuer to call the issue during the noncall
Purchasing power parity
The notion that the ratio between domestic and foreign price levels should equal
Purchasing Power Parity
Theory that says that over the long run exchange rate changes offset any difference between foreign and domestic inflation. This result assumes that the real exchange rate remains constant, something that is not true even in the long run.
purchasing power parity (PPP)
Theory that the cost of living in different countries is equal, and exchange rates adjust to offset inflation differentials across countries.
An option granting the right to sell the underlying futures contract. Opposite of a call.
An option to sell a stipulated amount of stock or securities within a
Put an option
To exercise a put option.
A bond that the holder may choose either to exchange for par value at some date or to extend for a
This security gives investors the right to sell (or put) fixed number of shares at a fixed price within
A contract that gives the holder the right to sell an asset for a
Right to sell an asset at a specified exercise price on or before the exercise date.
Contract that grants the right to sell at a specified price at some time in the future.
The price at which the asset will be sold if a put option is exercised. Also called the strike or
Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon
A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate
The process of moving received items to storage and recording the related
A bond that allows the holder to redeem the bond at a
Relative purchasing power parity (RPPP)
Idea that the rate of change in the price level of commodities in
Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices.
the total completed and sold output of a plant during a period
An agreement to put a specified amount of product per period through a particular
Sales revenue less the cost of materials.
Transferable put right
An option issued by the firm to its shareholders to sell the firm one share of its
A short call option position in which the writer does not own shares of underlying stock
A short put option position in which the writer does not have a corresponding short stock
Yield to call
The percentage rate of a bond or note, if you were to buy and hold the security until the call date.
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