In this passage, the bachelor's story ends with the heroine being killed but the pigs staying alive.

“The story began badly,” said the smaller of the small girls, “but it had a beautiful ending.”

“It is the most beautiful story that I ever heard,” said the bigger of the small girls, with immense decision.

“It is the only beautiful story I have ever heard,” said Cyril.

A dissentient opinion came from the aunt.

“A most improper story to tell to young children! You have undermined the effect of years of careful teaching.”

“At any rate,” said the bachelor, collecting his belongings preparatory to leaving the carriage, “I kept them quiet for ten minutes, which was more than you were able to do.”

“Unhappy woman!” he observed to himself as he walked down the platform of Templecombe station; “for the next six months or so those children will assail her in public with demands for an improper story!”

–“The Storyteller,”
Saki

How does the characterization of the children create satire?
A they reacted happily to a death
How does the characterization of the aunt create satire?
A she overreacts to the story

According to the given excerpt, we can see that the author talks about the death of the heroine in the story, but how the pigs stay alive against all odds and describes it as a "happy ending"

As a result of this, we can see how the characterization which is used of the children helps to create satire because it shows that the children's reaction to a death is a happy one and the obvious overreaction which was used.

Therefore, the correct answers are options A and B.