Sep 2011, #8

Hello again ,

I'm trying to understand the third part of this question. I'm not sure what the examiners mean when they say the critical value is 500. Also, what does that value have to do with what K should be?

Thanks.

 

I can't see where you mean, sorry. My copy of the Report refers to k as the critical value, not 500.

 

Sorry, what I meant is that the Examiners say that at the critical value the holder should be indifferent, thus this value is p+=500. I'm just a bit lost on what the examiners mean by this. Also, the part above this that says that current exercise value increases with S1, I'm not sure I get that.


Thanks!