P + K = Bond + Call, however when we consider a structured product where participation in an Index can be as great as 120% of the Index in a Call Option, this does not hold. The implication is that P + K < Bond Call?
Am I wrong here?
I could not understand the equality P + K = Bond + Call if we put the time moment be equal expiration date T assuming that put, call and bond expirations are equal to TP + K = Bond + Call, however when we consider a structured product where participation in an Index can be as great as 120% of the Index in a Call Option, this does not hold. The implication is that P + K < Bond Call?
Am I wrong here?
At T that is expiration for put, call, and bond equality P + K = Bond + Call should be transformed to max{ K - S ( T ) , 0 } + K = 1 + max { S ( T ) - K , 0 } . Such identity does not obvious and looks rather wrong. In order to verify it we should consider two scenarios : K > S ( T ) and inverse one. If we see equality of both parts the formula is correct otherwise one should recognize that formula incorrect.I could not understand the equality P + K = Bond + Call if we put the time moment be equal expiration date T assuming that put, call and bond expirations are equal to TP + K = Bond + Call, however when we consider a structured product where participation in an Index can be as great as 120% of the Index in a Call Option, this does not hold. The implication is that P + K < Bond Call?
Am I wrong here?
Let To < T b be options and bond expirations then the put-call parity formula at To is equal toReplace S(t) with the bond, the bond matures *after* the option expiration date?