I think the answer to 315.1 is B, because statements a, c, and d was mentioned in the text book.
I also have a question regarding the default01.
The textbook points out that default01 is always positive, but the formula for default01 is:
1/20[(mean value/loss based on PD+0.1%)-(mean...
Since this topic focus on the Merton Model, may I post a related question?
The answer is to calculate the Dt by present value of D minus put option, my question is,
why not using call option to calculate the Et directly? Many thanks