Hi, The model solutions state that B(t)=F(t)-E(t) and E(t) is like a call option. But as an alternative is it acceptable to describe the debt as having the value of PV of nominal value less a put option with underlying asset the company value and strike price L, the nominal value of the debt? Thank you
The two payoffs that you've described are identical. The law of one price then says that they will have the same value. The first approach probably requires slightly less work, but only slightly.
