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Merton model | Debt/equity, relative value & asset volatility

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“The only perfect hedge is in a Japanese garden”

In this update, we present an alternative bottom-up framework for evaluating relative value opportunities between fixed income assets and equities, which often leads to countervailing conclusions compared to those reached by Wall Street analysts using mainstream methods.

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Merton model | Debt/equity, relative value & asset volatility

Credit-equity relative value trades with CDS and equity options