The relationship between the prices of the underlying stock, a call option, a put option, and a risk-less asset is referred to as the A. put-call parity relationship.
The following presumptions underlie how the put-call parity principle operates. The interest rate is constant and does not vary over time. The underlying stock's dividend payments are known and assured. There are no transfer restrictions and the underlying stock is liquid.
A convertible security's current value is divided by the conversion ratio, or the number of shares it can be converted into, to arrive at the conversion parity price.
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