Hi I am struggling with part (v) of Q8 from the Sept 2006 paper. I have an idea what's going on - we are trying to find U (strike price) such that management fee under the performance-related free structure has the same value at time 0 as fixed fee in part (vi). But I'm finding it very hard to follow IFoA solution! 1) How has the payoff function been derived? 2) I believe that the payoff function has been split into a number of what appears to be a number of options? Apologise on lack of input on my end for this q - really just hit a wall on it! Help appreciated, thank you, Darragh
Hi This question is definitely challenging, and there are already a number of forum posts which I think cover your concern. Check these out: https://www.acted.co.uk/forums/index.php?threads/sept-06-q8-v.2805/ https://www.acted.co.uk/forums/index.php?threads/sept-2006-exam-q8-v.1592/ If that doesn't do it be sure to message me. Thanks