CBOE has introduced credit event binary options, kind of as a retail trader's CDS. These binary options are worth $1 if there is a credit event (ie, bankruptcy) before expiration, and $0 if there is no credit event (ie, solvency) at expiration. The option's premium is quoted in pennies and indicates the chance of a bankruptcy during the option's lifetime (eg, $0.11 is 11% chance).
How would someone price one of these options? My gut is that the premium should be similar to the delta of a deeply out-of-the-money put option. Any other thoughts?