San-Lin ChungChien-Ling LoPai-Ta Shih2019-07-222019-07-222017-04https://scholars.lib.ntu.edu.tw/handle/123456789/414476Under a general equilibrium framework, this study derives an analytic solution for the prices of options on individual stocks with bankruptcy risk. Different from traditional jump-to-default models, a firm's default probability herein is state-dependent and negatively related to its future stock prices. Using the market implied volatility of 60 firms during 1996-2015, the empirical results show that our model significantly outperforms the traditional model in terms of option pricing fits.enjournal article