Put-Call Parity for European Exotic Options
15 Pages Posted: 3 Jul 2009
Date Written: June 28, 2009
I propose a simple generalization of put-call parity that holds for a large class of exotic European options. The result rests on a reasonable generalization of the concepts of put and call. The proof is based on the fundamental theorem of arbitrage pricing and elementary properties of real numbers. I also propose a generalization of the notion of intrinsic value and volatility smile. Here I leverage on the relationship between put-call parity and the smile/smirk in the vanilla case.
Keywords: no-arbitrage equalities, Put-Call Parity, arbitrage pricing, European options, exotic options, volatility smile/smirk, intrinsic value
JEL Classification: G13
Suggested Citation: Suggested Citation