# question on put call parity

• May 20th 2011, 01:13 PM
cooltowns
question on put call parity
Hi

My question is

Derive the put-call parity relationship between the value C of a European call option and the value P of a European put option, with the same strike price E and expiry date T, when the risk free interest rate is

$r(t)=0.1e^{-0.2t}$

any help is appreciated

thanks(Hi)
• May 20th 2011, 05:55 PM
Wilmer
• May 21st 2011, 01:02 AM
SpringFan25
can you derive it for a constant r(t)?

if so, you just need to adjust your accumulated cashflows to reflect the variable r(t).
• May 21st 2011, 01:26 AM
cooltowns
yep I was confused about the interest rate $r(t)$

Does the r(t) go with the bond function which involves a interest rate?
• May 21st 2011, 04:18 AM
SpringFan25
Your question is confusingly worded. i cant tell if you have the right idea or not.

You need use r(t) to calculate the amount of money you would get on the strike date if you put E in a bond now. Unless your teacher thinks you are some kind of genius, you will have been taught how to do this before being set the question ;)