Question: Show that under Mertons model in Section 24.6 the credit spread on a T-year zero-coupon bond is ln[N(d 2 ) + N(d1)/L] / T where

Show that under Merton’s model in Section 24.6 the credit spread on a T-year zero-coupon bond is –ln[N(d2) + N(–d1)/L] / T where L = De–rT / V0.

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