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

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  • Wilson, Arthur J.
  • Kim, Geetae

Abstract

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.

Suggested Citation

  • Wilson, Arthur J. & Kim, Geetae, 2015. "Put-call parity, the triple contract, and approaches to usury in medieval contracting," Financial History Review, Cambridge University Press, vol. 22(2), pages 205-233, August.
    • Handle: RePEc:cup:fihrev:v:22:y:2015:i:02:p:205-233_00
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