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Basic Question 2 of 11
The assumption used in the structural model include that the company's assets trade in frictionless markets that are arbitrage free. This implies:
II. no transaction costs.
III. the company's asset value is observable at all times.
I. markets are liquid.
II. no transaction costs.
III. the company's asset value is observable at all times.
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Edward Liu
Learning Outcome Statements
explain structural and reduced-form models of corporate credit risk, including assumptions, strengths, and weaknesses;
CFA® 2025 Level II Curriculum, Volume 4, Module 29.