Here is the definitive answer: https://www.optionsanimal.com/what-happens-value-option-when-company-declares-bankruptcy/ So I guess the put option would just reach its maximum value which is also called its intrinsic value (K - 0) and I guess since that's the max. that anyone would get so nobody would be willing to pay for the premium over that amount to buy it so no "infinity" scenario then. Hmmn... Never thought of that.
No, that is actually quite true. In the early 2000's I tried to get access to the Plain Vanilla Interest Rate Swaps Market on Garban, ICAP, and Prebon Yamane and I couldn't get an ISDA through one of the biggest Proprietary Trading Firms in Chicago. We could trade ICE and Clearport Energy Swaps, we could trade BrokerTec and Cantor cash Treasuries - but couldn't get close to an ISDA. Which sucked. I had a buddy who was killing it on the Northern Trust Bank Desk.
When you first learned to tie your shoes did someone on a message board cut you down? Props to @JSOP for coming back on the thread and closing the loop by demonstrating his newfound understanding.
CBOE made two attempts at something that might be accessible to retail, DOOMs and Credit Event Binary Options, but both are now defunct as far as I know. The ICE Eris credit futures are still somewhat alive. The problem in general with exchanges that especially impacts these type of products is their "build it and they will come" mentality. They throw products at the wall in the hopes that something sticks but don't even make the most basic effort to ensure they're tradable. So they'll never show up on retail broker's platforms, never have market makers, and end up just dying even if there was a moderate interest in them if they could be bothered to put in minimal effort to support them. All to say don't hold your breath that you'll find anything you and I can access any time soon.
I would suggest that if you’d like to make a play on mortgages - find a listed stock with heavy mortgage balance sheet exposure or a mortgage bond fund. I don’t have any specific name suggestions. Your own personal access to the Swaps market is not going to happen.