The Put-call parity (PCP) relationship, one of the fundamental building blocks in option pricing theory, is the focus of a new educational article by Professor Paul B. McGuinness, Chairman of the Department of Finance at The Chinese University of Hong Kong, and Mr. Kevin Cheng, the Hong Kong Exchanges and Clearing Limited (HKEx) Derivatives Market's Vice President of Market Development, Training and Education.

The article includes a brief discussion of the fundamentals of PCP, an example of the PCP relationship from the HSI Options market and an explanation of how arbitrageurs can use PCP.

"Noticeable violation of the definable relationship between call premium and the premium of an equivalent put, dictated by PCP, suggests arbitrage opportunities," the authors note in their conclusion.

"Put-call Parity and Market Efficiency" is the ninth in a series of educational articles aimed at enhancing public understanding of the derivatives markets and the important role they play in Hong Kong.

A copy of the article accompanies this press release. It can also be found on the following website - www.hkfe.com - under the News Centre's Special Reports section. Past education articles are also available on the website.

For enquiries, please contact Henry Law, Senior Vice President, Corporate Communications, HKEx on 2840 3862.