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Refer to option pricing theory to explain why the limited liability shares of an insolvent firm might still trade at a positive value (even if
Refer to option pricing theory to explain why the limited liability shares of an insolvent firm might still trade at a positive value (even if the market was strong-form efficient). Noting that both share-holders and debt-holders of a firm in this position have potentially competing interests, what strategy does the theory suggest that the firm should follow to maximise the pecuniary outcome for share-holders?
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