In the Merton model, we assume from the outset that

V = E + L

Firm(Asset) = Equity + Debt

However, in Merton calculation examples, we are given V and L(face value of debt) and asked to calculate E,by using the BSM formula. This ends up vastly different from being V - L (and I also don't see the point in using this formula if E is simply V - L ?)

?????

V = E + L

Firm(Asset) = Equity + Debt

However, in Merton calculation examples, we are given V and L(face value of debt) and asked to calculate E,by using the BSM formula. This ends up vastly different from being V - L (and I also don't see the point in using this formula if E is simply V - L ?)

?????

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