Put Call Parity in the ESG
Document ID: 2010-1801
Published on: 26th April 2010
Author: Gioel Calabrese
In some cases confidence intervals of implied volatilities of calls and puts produced by the Equity Option Implied Volatility Test within the ESG do not overlap. The apparent contradiction with the put-call parity identity is explained by deriving a Monte Carlo version of the identity and using this to obtain conditions under which the continuum version is satisfied in the limit of infinite trials.
