{"paper":{"title":"The Cost of a Free Lunch: Evidence from U.S. Derivatives Markets","license":"http://arxiv.org/licenses/nonexclusive-distrib/1.0/","headline":"Enforcing put-call parity incurs hidden carry costs from daily settlement and margin risks despite near-zero price residuals.","cross_cats":["q-fin.CP"],"primary_cat":"q-fin.GN","authors_text":"Useong Shin","submitted_at":"2026-04-21T15:53:44Z","abstract_excerpt":"Put-call parity is a terminal-payoff identity; quoted residuals against traded futures are near zero. Yet enforcing parity is path-dependent, exposing arbitrageurs to daily settlement, margin, and finite capital. Using minute-level NBBO data on S&P 500 and Russell 2000 options, I extract option-implied discount factors, compare them with the OIS curve, and construct an annualized carry gap. A reduced-form specification centered on a volatility times sqrt(tau) path-risk term links the carry gap to implementation risk, trading frictions, and financial conditions, with coefficient signs stable ac"},"claims":{"count":4,"items":[{"kind":"strongest_claim","text":"The carry gap is an implementation wedge invisible in price space but systematic in carry space.","source":"verdict.strongest_claim","status":"machine_extracted","claim_id":"C1","attestation":"unclaimed"},{"kind":"weakest_assumption","text":"That the reduced-form specification centered on the volatility times sqrt(tau) path-risk term correctly isolates implementation risk without omitted variable bias or post-hoc selection of the functional form.","source":"verdict.weakest_assumption","status":"machine_extracted","claim_id":"C2","attestation":"unclaimed"},{"kind":"one_line_summary","text":"Enforcing put-call parity creates an annualized carry gap that is systematic in carry space and linked to a volatility times sqrt(tau) path-risk term using minute-level options data.","source":"verdict.one_line_summary","status":"machine_extracted","claim_id":"C3","attestation":"unclaimed"},{"kind":"headline","text":"Enforcing put-call parity incurs hidden carry costs from daily settlement and margin risks despite near-zero price residuals.","source":"verdict.pith_extraction.headline","status":"machine_extracted","claim_id":"C4","attestation":"unclaimed"}],"snapshot_sha256":"a5b83369b4b8290aaa580c80ce9dd99d88133fa0a2f89f9f25b359d263442174"},"source":{"id":"2604.19604","kind":"arxiv","version":5},"verdict":{"id":"734e5535-156f-4615-81de-4c86642d8032","model_set":{"reader":"grok-4.3"},"created_at":"2026-05-11T00:43:21.922383Z","strongest_claim":"The carry gap is an implementation wedge invisible in price space but systematic in carry space.","one_line_summary":"Enforcing put-call parity creates an annualized carry gap that is systematic in carry space and linked to a volatility times sqrt(tau) path-risk term using minute-level options data.","pipeline_version":"pith-pipeline@v0.9.0","weakest_assumption":"That the reduced-form specification centered on the volatility times sqrt(tau) path-risk term correctly isolates implementation risk without omitted variable bias or post-hoc selection of the functional form.","pith_extraction_headline":"Enforcing put-call parity incurs hidden carry costs from daily settlement and margin risks despite near-zero price residuals."},"integrity":{"clean":true,"summary":{"advisory":0,"critical":0,"by_detector":{},"informational":0},"endpoint":"/pith/2604.19604/integrity.json","findings":[],"available":true,"detectors_run":[],"snapshot_sha256":"c28c3603d3b5d939e8dc4c7e95fa8dfce3d595e45f758748cecf8e644a296938"},"references":{"count":0,"sample":[],"resolved_work":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57","internal_anchors":0},"formal_canon":{"evidence_count":2,"snapshot_sha256":"a0883d4860c9e6cb63f0bddb19493d1d988042187f870536c39f3128f2203378"},"author_claims":{"count":0,"strong_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"builder_version":"pith-number-builder-2026-05-17-v1"}