Parity

AAA

DEFINITION of 'Parity'

1. In general, a situation of equality. Parity can occur in many different contexts, but it always means that two things are equal.

2. The official value.

3. In an exchange market, when all brokers bidding for the same security have equal standing due to identical bids.

INVESTOPEDIA EXPLAINS 'Parity'

1. For example, in the foreign-exchange market, currencies are at parity when their exchange rate is exactly 1 to 1.

2. In other words, the par value.

3. When parity occurs, the market must determine which bidding broker will obtain the security by alternative means. Therefore, the winning bid is typically awarded by random draw.

RELATED TERMS
  1. Par Value

    The face value of a bond. Par value for a share refers to the ...
  2. European Currency Unit - ECU

    The European Currency Unit (ECU) was the precursor to the Euro, ...
  3. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  4. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  5. Broker

    1. An individual or firm that charges a fee or commission for ...
  6. Uncovered Interest Rate Parity ...

    A parity condition stating that the difference in interest rates ...
Related Articles
  1. The Impact Of Currency Conversions
    Forex Education

    The Impact Of Currency Conversions

  2. Put-Call Parity And Arbitrage Opportunity
    Options & Futures

    Put-Call Parity And Arbitrage Opportunity

  3. Forex Tutorial: The Forex Market
    Forex Education

    Forex Tutorial: The Forex Market

  4. What Does The Dow Jones Industrial Average ...
    Investing Basics

    What Does The Dow Jones Industrial Average ...

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center