The correct answer is: D. stock
Put-call parity is a relationship between the prices of a call option and a put option, both with the same strike price and expiration date. It states that the price of a call option plus the present value of the strike price is equal to the price of a put option plus the price of the underlying stock.
This relationship can be derived from the fact that a call option and a put option are essentially two sides of the same coin. A call option gives the buyer the right, but not the obligation, to buy the underlying stock at a specified price (the strike price) on or before a specified date (the expiration date). A put option gives the buyer the right, but not the obligation, to sell the underlying stock at a specified price (the strike price) on or before a specified date (the expiration date).
If the price of the underlying stock is above the strike price, then the call option is in the money and the put option is out of the money. In this case, the buyer of the call option can exercise the option and buy the stock at the strike price, which is below the market price. The buyer of the put option will not exercise the option, because they can sell the stock at the market price, which is above the strike price.
If the price of the underlying stock is below the strike price, then the put option is in the money and the call option is out of the money. In this case, the buyer of the put option can exercise the option and sell the stock at the strike price, which is above the market price. The buyer of the call option will not exercise the option, because they can buy the stock at the market price, which is below the strike price.
Therefore, the price of a call option and a put option, both with the same strike price and expiration date, must be equal to the price of the underlying stock plus or minus the present value of the strike price.
Binomial property is a property of a probability distribution that states that the probability of an event occurring can be expressed as a sum of two or more probabilities.
Constant property is a property of a function that states that the value of the function does not change over time.
Constant and variable property is a property of a function that states that the value of the function changes over time, but the rate of change is constant.
Stock is a share in the ownership of a company.