medium · Private Credit underwriting-credit-analysis
Under the Merton Model of credit risk, which of the following best describes the structural view of a firm's equity?
- A put option held by creditors against the firm's underlying assets.
- A senior claim that receives dividends before interest is paid to lenders on the term loan.
- A risk-free asset combined with a long position in a credit default swap on the issuer.
- A call option on the firm's assets with a strike price equal to the face value of debt.
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