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arXiv · 2604.19605

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

Useong Shin
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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.

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Useong Shin. 2026-04-21. Tuning in to Frequencies: How Global Assets Align with U.S. Put-Call Parity Residuals. https://arxiv.org/abs/2604.19605

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