In general, equity may be viewed as a call option on the firm, The classic application of this approach is to the valuation of distressed securities, already discussed in the original Black-Scholes paper. Here, since the principle of limited liability protects equity investors, shareholders would choose not to repay the firm's debt where the value of the firm (as perceived) is less than the value of the outstanding debt; see bond valuation. Of course, where firm value is greater than debt value, the shareholders would choose to repay (i.e. exercise their option) and not to liquidate. Thus analogous to out the money options which nevertheless have value, equity will (may) have value even if the value of the firm falls (well) below the face value of the outstanding debt—and this value can (should) be determined using the appropriate option valuation technique. See also Merton model. (A further application of this principle is the analysis of principal–agent problems; see contract design under principal–agent problem.)