A share of stock can be thought of as a put option on the firm's assets with a strike price equal to the face value of debt.

Name: A share of stock can be thought of as a put option on the firm's assets with a strike price equal to the face value of debt.
Brand: Quizplus
Rating: 4.9 (49 reviews)

Question

Quizplus · Accepted Answer

A share of stock represents ownership in a company, while a put option gives the holder the right to sell the underlying asset at a specific price (strike price). Therefore, a share of stock cannot be thought of as a put option on the firm's assets.

A Share of Stock Can Be Thought of as a Put