  In this note, we develop stock option price approximations for a model which
takes both the risk o default and the stochastic volatility into account. We
also let the intensity of defaults be influenced by the volatility. We show
that it might be possible to infer the risk neutral default intensity from the
stock option prices. Our option price approximation has a rich implied
volatility surface structure and fits the data implied volatility well. Our
calibration exercise shows that an effective hazard rate from bonds issued by a
company can be used to explain the implied volatility skew of the implied
volatility of the option prices issued by the same company.
