Abstract

http://ssrn.com/abstract=780727
 
 

References (6)



 
 

Citations (1)



 


 



Regulatory Arbitrage using Put-Call Parity


Michael S. Knoll


University of Pennsylvania Law School; University of Pennsylvania - Real Estate Department


Journal of Applied Finance, Vol. 15, No. 1 Spring/Summer 2005

Abstract:     
The conflict between appearance and reality often arises in the law, where it is usually cast as pitting the substance of a transaction against its form. That conflict also arises in finance in the form of the put-call parity theorem, which states that given any three of the following four financial instruments: 1) a riskless zero coupon bond, 2) a share of stock, 3) a call option on the stock, and 4) a put option on the stock - the fourth instrument can be replicated. Thus, the theorem implies that any financial position containing any of those four instruments can be constructed in at least two different ways. Its legal significance arises when economically equivalent holdings receive different legal treatments because they are constructed from different instruments. This article provides several examples of how put-call parity has been used to engage in regulatory arbitrage and discusses the significance of such arbitrage for regulatory policy.

Number of Pages in PDF File: 11

JEL Classification: G18, G39, H26, K29, L59, N40

Accepted Paper Series





Date posted: August 20, 2005  

Suggested Citation

Knoll, Michael S., Regulatory Arbitrage using Put-Call Parity. Journal of Applied Finance, Vol. 15, No. 1, Spring/Summer 2005. Available at SSRN: http://ssrn.com/abstract=780727

Contact Information

Michael S. Knoll (Contact Author)
University of Pennsylvania Law School ( email )
3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-6190 (Phone)
215-573-2025 (Fax)
University of Pennsylvania - Real Estate Department ( email )
Philadelphia, PA 19104-6330
United States
Feedback to SSRN


Paper statistics
Abstract Views: 3,112
Downloads: 20
References:  6
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.266 seconds