According to option pricing models of credit risk and default, the debt holders of a corporation may have to accept assets which have a value less than the face value of the debt.

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This is true because in the event of default, the assets of the corporation may not be enough to cover the full value of the debt, leading to a loss for debt holders. Option pricing models take into account the likelihood and potential magnitude of such losses.

According to Option Pricing Models of Credit Risk and Default