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What are three reasons why there is a difference between theoretical and actual options price, given...

What are three reasons why there is a difference between theoretical and actual options price, given put call parity

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Answer #1

Three reasons for difference between theoretical and actual options price :
1. There are transaction costs included in actual options price which are not included in theoretical price.
2. Theoretical assumption is that market is highly liquid which is impractical in the real world. Hence actual options are not always liquidated easily.
3. In theoretical case it is considered that interest rates do not change but in actual option there is change in interest rates.

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