Show that european call, put with same maturity and strike are equal iff strike=forward price

barrycohen

New Member
29226


The book defines put call parity as:
\( P(t)+S(t)-C(t) = Ke^{-r(T-t)} \)
where P(t) is value of the put, C(t) value of the call, S(t) is the value of the underlying asset, K is strike price.

In the proof, they substitute F (price of the forward) for the value of the asset. Why are they allowed to do this? Aren't the forward price and asset value different things?

Thanks!
 

barrycohen

New Member
Update: Figured it out. Proof was using a different definition of put-call parity where asset pays dividends
 
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