Derive the put-call parity formula

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A digital (k, t) call option gives its holder 1 at expiration time t if s(t)>=k or 0 if s(t)<k. A digital (k, t) put option gives its holder 1 at expiration time t if s(t)<k or 0 if s(t)>=k. Let C1 be the cost of the call. Let C2 be the cost of the put. Derive the put-call parity formula.

Reference no: EM13914990

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Derive the put-call parity formula : A digital (k, t) call option gives its holder 1 at expiration time t if s(t)>=k or 0 if s(t) =k. Let C1 be the cost of the call. Let C2 be the cost of the put. Derive the put-call parity formula.

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