Abstract
This paper tests the effects of short-sale constraints on derivative prices by considering deviations from put-call parity (PCP). To measure the impact of short-sale constraints, I focus on Sweden and a particular period during which shorting stocks was almost impossible and stock options were traded. I found that the deviations from PCP corresponding to a short position in the stock were larger in absolute magnitude during the period when shorting was restricted than during the subsequent period. The pattern was observed only for stock options with an underlying share that could not be shorted abroad.