Give two interpretations of the value of a bond from an option's perspective

What will be an ideal response?

First, thevalue of a bond can be viewed as a long position in the corporation's assets and the sale of a call option to the common stockholders on the corporation's assets. This implies that the value of a corporate bond is the value of the total assets reduced by the value of the call option.

Second, the value of a bond can be viewed as a position in a risk-free bond reduced by the value of the put position that the stockholders sold to the bondholders on the firm's assets. To value the option using this approach to corporate bond valuation, the following inputs are needed: the firm's capital structure; the firm's market value (typically derived from its stock price); and, the volatility of the firm's market value (typically derived from the volatility of the stock's price).