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Parity

What is 'Parity'

Parity refers to two things being equal to each other. The term "par value" for a bond is similar to parity. Parity can also refer to two securities having equal value, such as a convertible bond and the value of the stock if the bondholder chooses to convert into common stock.

Explaining 'Parity'

Many investors have to make decisions about the value of two different investments. A convertible bond, for example, allows the investor to own a bond and earn a stated rate of interest or convert the bond into a fixed number of shares of common stock. Assume, for example, that an investor can own a $1,000 corporate bond with a market price of $1,200 or convert the bond into 100 shares of common stock. If the stock’s market price is $12, the market value of the 100 shares of stock is also $1,200. As a result, the bond and the stock are at parity.

Factoring in Options

The term "parity" also applies to stock options. One call option, for example, allows the owner to buy 100 shares of stock at a specific price (strike price) for a stated period of time. Assume that an investor owns a $50 call option that expires on September 30. The investor has the right to buy 100 shares of stock at $50 per share until the expiration date in September.

How Currency Trading Defines Parity

Companies based in the United States that have operations in foreign countries must convert U.S. dollars into other currencies. If a U.S. firm does business in France, for example, the company can convert U.S. dollars into euros and sends those euros to fund its French business operations. If the exchange rate is $1 to €1, the currencies are at parity.

Examples of Parity in Asset Management

Risk parity is an asset management process that evaluates risk based on asset classes rather than allocation of capital. Tradition asset allocation strategy divides assets between stocks, bonds and cash. The goal is to provide diversify and reduce risk by using these the types of investments. Risk parity, on the other hand, allocates dollars based on four components: equities, credit, interest rates and commodities. Risk parity attempts to reduce risk and increase investment returns.


Further Reading


Threshold cointegration and purchasing power parity in the pacific nations
www.tandfonline.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

Purchasing power parity and unit root tests using panel dataPurchasing power parity and unit root tests using panel data
www.sciencedirect.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

New evidence on purchasing power parity from 17 OECD countriesNew evidence on purchasing power parity from 17 OECD countries
www.tandfonline.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

New evidence of the validity of purchasing power parity from TurkeyNew evidence of the validity of purchasing power parity from Turkey
www.tandfonline.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

National price levels, purchasing power parity, and cointegration: a test of four high inflation economiesNational price levels, purchasing power parity, and cointegration: a test of four high inflation economies
www.sciencedirect.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

Testing long-run validity of purchasing power parity for selected emerging market economiesTesting long-run validity of purchasing power parity for selected emerging market economies
www.tandfonline.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

The politics and economics of mental health 'parity'lawsThe politics and economics of mental health 'parity'laws
www.healthaffairs.org [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

Evidence on the purchasing power parity in a panel of citiesEvidence on the purchasing power parity in a panel of cities
www.tandfonline.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

Purchasing power parity in economies in transition: evidence from Central and East European countriesPurchasing power parity in economies in transition: evidence from Central and East European countries
www.tandfonline.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …

Testing purchasing power parity hypothesis for transition economiesTesting purchasing power parity hypothesis for transition economies
www.tandfonline.com [PDF]
… Search in: This Journal. Advanced search. Journal Applied Economics. Volume 36, 2004 - Issue 9 … 273. Views. 62. CrossRef citations to date. Altmetric. Listen. Original Articles. Threshold cointegration and purchasing power parity in the pacific nations …



FAQ


What is Parity?

Parity is a measure of the relationship between two things.

What does parity measure?

Parity measures the relationship between two things.

What are some examples of parity?

Examples include gender equality, racial equality, and economic equality.

How can you use parity to make comparisons?

You can use parity to compare different groups or people based on their similarities and differences.

Why do we need to know about parity in society?

We need to know about parity in society because it helps us understand how similar or different various groups are from each other. This information can help us make better decisions for our future as well as create a more equal society where everyone has an opportunity to succeed regardless of their background.

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