I think the answers work if it is a 2 year European call but the question says asks to value a 1 year European call. Is that just a typo in the paper?
I think the wording on this question is terrible. Most of the question relates to a two-period model. Then out of nowhere comes the 1 year call. Presumably, the examiners expected you to deduce that each period was half a year, because why else would they have mentioned 2-period if they didnt want you to use it the marks available
Isn't the point that it still doesn't make sense? Generally when I find a misleading question I just put a disclaimer on my answer explaining how I've interpreted it.
Sorry to bring this discussion up again, i had no idea if a period was 6 months or 1 year - i thought that it should be 6 months based on part (i) but thought the examiners meant it was a year. How would they go about marking it in this case? Could full marks be awarded anyway or is it very strict? Thanks in advance
