A relationship between two combined investment positions: the first represents the value of a European call with a certain exercise price and exercise date, while the second is made up of the value of a European put with the same exercise price and exercise date. The value of the first position can be deduced from the other’s or vice versa. Mathematically, the put-call parity is expressed as:

c + k e^-rT = p + S₀

c: European call

k: strike price of the call

r: risk-free interest rate

T: Expiration date

p: European put

S₀: Underlying stock price at inception

The put-call parity doesn’t hold for non-cash-settled exchange-listed options, both American-style and European -style.