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GLOSSARY: Enter search term:
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Glossary Term: PARITY

Definition(s) for PARITY:


1. ) For convertibles, it refers to the level at which a convertible security's market price equals the aggregate value of the underlying common stock; value/worth of the convertible bond considered only as an equity instrument (Conversion ratio times common price). For international parity, it refers to the U.S.$ price of a foreign stock's last sale in an overseas market (Local currency stock price times forex rate times ADR ratio). For listed parity, it is the condition whereby no party has floor priority, and matching thus occurs. For options parity, it is the dollar amount by which an option is in the money.

2. ) Describing an MONEY.htm'>in-the-money option trading for its intrinsic value; that is, an option trading at parity with the underlying stock. Also used as a point of reference - an option is sometimes said to be trading at a half-point over parity or at a quarter-point under parity. An option trading under parity is a discount option. See also Discount and Intrinsic Value.

3. ) A 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 for parity.' Parity may be measured against the stock's last sale, bid, or offer.


See Also:
PARITY PRICE, PARITY VALUE OF A CONVERTIBLE BOND, ABSOLUTE FORM OF PURCHASING POWER PARITY, CONVERSION PARITY, CONVERSION PARITY PRICE, COVERED INTEREST RATE PARITY, DEBT SERVICE PARITY APPROACH, FORWARD PARITY, INTEREST RATE PARITY LINE (IRP), INTEREST RATE PARITY THEOREM, PURCHASING POWER PARITY (PPP), PUT-CALL PARITY RELATIONSHIP, RELATIVE PURCHASING POWER PARITY (RPPP), PUT-CALL PARITY THEOREM, PARITY DEBT, PRIORITY, PARITY, YIELDING (PPY), PURCHASING POWER PARITY THEORY


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