Let's look more carefully at very-low-strike puts.Suppose there's a "threshold strike," call it K₁, for which the only way that XYZ could fall below K₁ over the next 6 months is if the company went bankrupt over the period.And assume that if that were to happen the stock price would fall to $1.

Show that for any strike K < K₁ the put price formula should be:

PUT PRICE=e^-R(T-t)x(K - $1)x(PROBABILITY OF BANKRUPTCY)