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put-call delta parity


\begin{displaymath} \frac{\partial v(x,K,T,t,\sigma,r_d,r_f,+1)}{\partial x}-\fr... ...partial v(x,K,T,t,\sigma,r_d,r_f,-1)}{\partial x}=e^{-r_f\tau} \end{displaymath} (26)

In particular, we learn that the absolute value of a put delta and a call delta are not exactly adding up to one, but only to a positive number $e^{-r_f\tau}$. They add up to one approximately if either the time to expiration $\tau$ is short or if the foreign interest rate $r_f$ is close to zero.



2000-06-11
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