Please capitalize where necessary: according to the model developed by merton the risk could be reduced to zero, but in practice some of the crucial assumptions of merton's model did not hold so the risk of the hedged portfolios was not really zero, as subsequent events proved.
According to the model developed by Merton the risk could be reduced to zero, but in practice some of the crucial assumptions of Merton's model did not hold so the risk of the hedged portfolios was not really zero, as subsequent events proved.