Put-call-forward parity

[yasser almansoor]

Hi gus
i have a note and i hope that you correct it for me
when they came to explained the call-put forward parity( page 98, book 6) , they remove the underlying price by assumed that we go a long contract and long RF bond.
then they proved that the results are identical under any condtion, after that they mentioned the value of portfolio (protective put with forward) = forward price/ (1+RF)+ P0 (equation 13)
my questions are
1- if we are long the Bond, that means we are a lender so the position is must be a (negative) forward/ (1=RF), why they ignor the sign? and states it as forward price/ (1+RF)+ Po
2- why they didn’t write the forward contrac position, is it because it has a zero value?

 

[wallkahn]

1) If you long the bond that means you have an asset that will yield money at mature date. That is why its sign is positive.
2) I dont clearly understand what you mean here but if you ask why they didnt write whether long or short position, in put - call parity you are always in the long position (it is just a replication of the underlying asset)
Hope this will help…