Chartered Financial Analyst Level 2
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Which of the following is the most appropriate interpretation of debt and equity in terms of options in a structural model of credit risk?
Which of the following is the most appropriate interpretation of debt and equity in terms of options in a structural model of credit risk?
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A
Equity is a purchased call option on the assets
B
Debt is short a risk-free bond and long a put option on the assets
C
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