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Put/Call Parity
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A boundary condition which, subject to transaction costs in the marketplace and the possibility of early exercise, holds relative put and call price relationships within a narrow range. For European options, put/call parity in advance of expiration will be subject to the liquidity of the market for the options and the underlying. For American options, an apparent violation of put/call parity is often an indication that early exercise is appropriate. See also Boundary Conditions, No-Arbitrage Condition.
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