Tuning in to Frequencies: How Global Assets Align with U.S. Put-Call Parity Residuals

2026/04/21 by Useong Shin · 1 voice
Economics, Econometrics and Finance · #q-fin.GN

paper · pdf

arxiv published 2026/04/21 · arxiv updated 2026/05/24

Abstract

Put-call parity is risk-neutral at terminal payoff, but its enforcement is path-dependent and capital-using. I test whether the SPX and RUT carry gap is explained by OIS-based funding, volatility, trading-friction, and financial-condition variables, or also by residual outside-option information. Adding IEFA, IGOV, and IAU improves in-sample and leave-one-year-out fit after U.S.-centered controls. Gains survive broad-dollar neutralization, alternative blocks, PCA, residualization, and nested horizon selection. Results support reduced-form P-Q alignment: finite-capital parity enforcement reflects physical-measure investment opportunities, not payoff-level no-arbitrage failure.

Citations

• Market Liquidity and Funding Liquidity
• The Limits of Arbitrage
• Common risk factors in the returns on stocks and bonds
• The arbitrage theory of capital asset pricing
• An Intertemporal Capital Asset Pricing Model
• Economic Forces and the Stock Market

Discussions

• Useong Shin: Tuning in to Frequencies: How Global Assets Align U.S. Put-Call Parity Residuals https://arxiv.org/abs/2604.19605 https://arxiv.org/pdf/2604.19605 https://arxiv.org/html/2604.19605 [bsky, 0 points, 0 comments]

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