Question #27
Reading: Reading 28 Credit Analysis Models
PDF File: Reading 28 Credit Analysis Models.pdf
Page: 11
Status: Correct
Correct Answer: A
Question
Using the structural model, the value of the put option on the assets of the company is equal to:
Answer Choices:
A. value of the risky bond minus value of the risk-free bond
B. credit valuation adjustment of the bond
C. the value of the call option on assets of the company
Explanation
Under structural model the put option value = value of risk-free bond – value of the risky
bond = CVA.