Parity

In the context of financial markets, securities and currencies are said to be at parity when their prices are equal (1:1 exchange rate in the case of currencies). Parity in convertible bonds is the theoretical price at which there is no gain or loss accruing to the bondholder i.e. the price of the underlying stock multiplied by the number of shares each bond is converted into. Option parity is reached when the option premium is the same as the intrinsic value. Economies achieve purchasing power parity when a basket of goods costs the same (is at parity) when adjusted for exchange-rate differentials.

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