Financial Risk Manager Part 2
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In the following things about Merton model, which of the statement is true?
A
In Merton model the payment to debt holder can be seen as the payoff of a riskless bond plus a put on the value of the firm.
B
The sudden surprise (a jump), leading to an unexpected default can be captured by the model.
C
The model can take into account the default prior to the maturity of debt, when a borrower claims so.
D
The value of the firm is difficult to pin down cause the market-to-market value of debt is often unknown.