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Read the original current-value inputs
All prices are per underlying unit on one valuation date. Call and put share underlying, strike and expiry, are European, and the case has no underlying income or benefit. D=0.95 values certain expiry cash at today’s date.
Price the terminal strike amount
The terminal amount K=100 has current value 100×0.95=95. This is the cash leg in the parity equation. The supplied 100 spot price is already a current value and is not discounted again.
Rearrange and reconcile
P0=C0+KD−S0=8+95−100=3. The stock-plus-put cost is 103, equal to the call-plus-funded-strike cost 103.
| Package | Current cost |
|---|---|
| Stock plus put | 100+3 = 103 |
| Call plus strike PV | 8+95 = 103 |
Treat another entered price as a model check
An entered put of 5 would produce a two-unit cost discrepancy under these assumptions. Before interpreting it, inspect dates, units, exercise style and income. This calculation does not assert that such quotes are available or supply an executable arbitrage transaction.