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Put-Call Parity for Currency Options

Any currency option deal may be equivalently valued as either a call or a put using a parity condition that is specific to currency options. This condition states that:

 

"Holding a call option to buy 1 unit of CCY A for x units of CCY B is the same as holding a put option to sell x units of CCY B for 1/x units of CCY A".

 

For example, the right to buy 1 USD for 1.90 NZD is equivalent to the right to sell 1.90 NZD for 0.5263 USD per NZD. If the spot rate is expressed in a consistent manner to the strike rate, then the computed total premium for the call leg will be the same as the computed total premium for the put leg, assuming both values are expressed in the same currency.

 

In This Section

An Example of Put-Call Parity for Currency Options

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