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To: LLCF who wrote (105167)	5/28/2001 12:09:37 PM
From: tyc:>	Respond to of 436258

Thank you very much ! Mark Adams responded, also saying that an interest rate factor should be included. Would you please take a look at my response to him ? What I was trying to say was this: If the option value of a mine includes an interest rate factor AND a volatility factor, the valuation of a forward seller simply abandons the volatility value. If the option value of a mine includes volatility but no interest, then the valuation of the forward seller trades- off the value of volatility for the value of interest. Do you not agree that using Black Scholes to calculate the option value of a mine, illuminates the inferiority of hedging. By eliminating the volatility factor they have turned the hedged production into a bond linked to the yield curve, and abandoned the value of the volatility factor. Of course, BlackScholes uses a log-normal distribution curve which presupposes a certain bullishness while in the past metal prices have shown a secular down trend.