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1 results

  • Put-call parity, the triple contract, and approaches to usury in medieval contracting

  • Arthur J. Wilson, Geetae Kim
  • Journal:
    Financial History Review / Volume 22 / Issue 2 / August 2015
    Published online by Cambridge University Press:
    09 October 2015, pp. 205-233

  • In this article we use put-call parity to show that ambiguity about ownership played a role in medieval businessmen's efforts to circumvent the Catholic Church's usury restrictions. That ambiguity created fertile ground for a financial innovation, the triple contract, that allowed some merchants to accomplish a kind of regulatory arbitrage. We also show that medieval clerics and merchants appear to have had at least an intuitive grasp of put-call parity, and that this insight shaped the Catholic Church's approach to medieval business contracts, and usury, nearly five centuries before put-call parity was described in the scholarly literature.