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Parity |
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Parity1. Equality. Same as par. See also interest parity and purchasing power parity. 2. Official value, or par value.ParityA term used to describe an option contract's total premium when that premium is the same amount as its intrinsic value. For example, when an option's theoretical value is equal to its intrinsic value, it is said to be 'worth parity.' When an option is trading for only its intrinsic value, it is said to be 'trading at parity.' Parity may be measured against the stock's last sale, bid, or offer.Similar MatchesDebt service parity approachDebt service parity approachPayment alternatives that provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal). Purchasing power parityPurchasing power parityThe notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies. Relative form of purchasing power parityRelative form of purchasing power parityTheory that the rate of change in the prices of products should be somewhat similar, but not absolutely the same when measured in a common currency, as long as transportation costs and trade barriers are unchanged. Interest rate parity line (IRP)Interest rate parity line (IRP)Diagonal line on a graph that characterizes interest rate parity. Covered interest parityCovered interest parityEquality of returns on otherwise comparable financial assets denominated in two currencies, assuming that the forward market is used to cover against exchange risk. As an approximation, covered interest parity requires that i = i* + p where i is the domestic interest rate, i* is the foreign interest rate, and p is the forward premium. Further SuggestionsPurchasing power parity theoryIncome disparity Conversion parity or value Interest rate parity line (IRP) Disparity Net parity Put call parity relationship Conversion parity Absolute form of purchasing power parity Purchasing power parity exchange rate Interest parity Spot futures parity theorem Central parity parity ratio Parity value Uncovered interest parity Conversion parity price Gross parity Forward parity Purchasing power parity Interest rate parity theorem Covered Interest Rate Parity |
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