I'm aware that there's an edit for this problem in Mahler's errata, however, I'm still confused by the following:
The probability of termination in year 3 is 0.0816 (or is it year 2?? it's year 2 in the original problem but I think mahler changed it to year 3 in the errata), so that means
.0816 = (Year 3 Cumulative Persistency) - (Year 2 Cumulative Persistency). What is the Year 3 Cum Pers and Year 2 Cum Pers then???? I can't seem to get .0816 from doing Year 3 Cum Pers - Year 2 Cum Pers.
The probability of termination in year 3 is 0.0816 (or is it year 2?? it's year 2 in the original problem but I think mahler changed it to year 3 in the errata), so that means
.0816 = (Year 3 Cumulative Persistency) - (Year 2 Cumulative Persistency). What is the Year 3 Cum Pers and Year 2 Cum Pers then???? I can't seem to get .0816 from doing Year 3 Cum Pers - Year 2 Cum Pers.
Asset Share Pricing Termination Problem- Mahler 21.35
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