medium · Frm Part 2 Credit Risk
According to the Merton structural model of credit risk, equity holders can be viewed as holding which of the following?
- A short position in a call option on the firm's assets.
- A long position in a call option on the firm's assets with a strike price equal to the face value of debt.
- A long position in a put option on the firm's assets.
- A long position in the firm's assets and a long position in a risk-free bond.
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