A Wall Street Trading Firm Is Using the Merton (1976)

Multiple Choice

A Wall Street trading firm is using the Merton (1976) jump-diffusion model to price their index options. They are pricing European calls and then using put-call parity to compute the prices of puts. The problem with this is

A) Put-call parity is not valid for models with jumps.
B) Put-call parity works only if jumps are symmetric.
C) Put-call parity works with jumps only if there are no dividends.
D) Nothing---there is no problem with using put-call parity even if there are jumps in the stock price.