\documentclass{article}
\input{15401-preamble}
\psetnum{1}
\psetheadertitle{Case}
\date{2011/10/05}
\begin{document}
\begin{pset}

  Some (mostly poorly thought out) notes about the CRL trading
  exercise.

  \begin{itemize}
  \item With no private information, the expected value will be
    $\$12+12$ (year 1 + year 2; ignoring discounting and any risk
    premium).
  \item Will start by computing the expected value given private
    knowledge, e.g. if we know ``not X1 and not X2'' the expected
    value is $\$12+21$ and that gives us a starting point.
  \item Some of the boundary cases are interesting. A value of \$0 is
    only possible if X1 and X2, and \$12 only if one or the other is
    true. Similarly, \$48 is possibly only if Z1 and Z2, and \$36 if
    one or the other is true. Seeing bids around \$12 in the order book
    may suggest someone knows either X1 or X2 isn't possible. Combined
    with our knowledge this may give us more information about the price.
  \item Maximum possible value of the stock is \$48, so selling above
    that always has positive return.
  \item After the first year is over, will need to subtract the value
    of the first-year dividend from any expected prices --- it has
    already been paid.
  \end{itemize}
\end{pset}
\end{document}