Steurer, E., Fahling, E. J., & Du, J. L. (2022). Empirical Analysis of Potential Put-Call Parity Arbitrage Opportunities with Particular Focus on the Shanghai Stock Exchange 50 Index. Journal of Financial Risk Management, 11, 66-78.
https://doi.org/10.4236/jfrm.2022.111003

has been cited by the following article:

• TITLE: European Options and Fixed Cost Spreads

  AUTHORS: Sunil K. Parameswaran, Sankarshan Basu

  KEYWORDS: European Options, Put-Call Parity, Fixed Cost Spreads, Generalized Method of Moments Estimation, Negative Time Value for Deep-in-the-Money Calls

  JOURNAL NAME: Theoretical Economics Letters, Vol.13 No.3, June 21, 2023

  ABSTRACT: This paper revisits the put-call parity condition for European options, on both non-dividend paying and dividend paying stocks, in the presence of fixed costs spreads. It demonstrates that the put-call parity condition becomes a set of inequalities under these conditions. A model patterned on the Roll model for fixed cost bid-ask spreads is postulated, and its estimation using a generalized method of moments (GMM) approach, is suggested. Finally, the paper demonstrates that in the presence of bid-ask spreads, European options on non-dividend-paying stocks may have a negative time value, unlike the case of such options in the absence of spreads. Also, due to the presence of such spreads, there could be situations, where both calls and puts with the same exercise price are simultaneously exercised.