hard · Quantitative Finance
Using the Merton structural model for credit risk, a firm has assets A_0 = 200 million and total debt D = 150 million maturing in T = 2 years. If r = 5% and asset volatility σ_A = 25%, calculate the distance-to-default (represented by the parameter d_2 in the Black-Scholes framework).
- 0.58
- 0.92
- 1.09
- 1.27
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