A REVISIT ON ARBITRAGE OPPORTUNITIES IN EUROPEAN OPTIONS MARKETS:PUT-CALL PARITY V/S BOX-SPREAD
Year:2020 Volume VI Issue I
Print ISSN :2454-6542,Online ISSN:2454-6542
Received on:12th March 2020, Received in Revised Form:20th March 2020, Accepted On:27th March 2020
Dheeraj Misra Jaipuria Institute of Management,VineetKhand, Gomti Nagar, Lucknow -226010
Corresponding Author: email@example.com
Put-call parity and box-spread strategy are generally used to assess arbitrage opportunities in any European options market. This paper, in the absence of transactions and using European options, aims at assessing under which conditions put-call parity should be preferred to box-spread strategy and vice versa. The theoretical results show that generally put-call parity should be preferred to box-spread strategy except under the case when arbitrage opportunities exist with both the exercise prices and portfolio involving put and futures is cheaper than the portfolio involving call and risk-free asset with one exercise price and costlier with another exercise price, where arbitrage profit as per box-spread strategy may be slightly higher than the combined arbitrage profit as per put-call parity.
Arbitrage, Options, futures, Box-spread, Put-call parity