Given two options, one is on 4 bonds, with 2 of them default. The other is on 8 bonds, with 4 of them default. Can anyone tell me which option priced higher, and why?Thank you so much.

Based only on this information, you would guess that the smaller portfolio has more volatility, and therefore the option is worth more. This assumes the options are the same type and expiry, and are for the same market value of underlying and have the same strike; that the volatilities and correlations of all the bonds are similar.It's easy to construct examples where the 8 bond portfolio options are worth more. The portfolio may have a larger market value, or a lower strike price for a call (or higher strike price for a put). The options could have longer time until expiry or the bonds might be more volatile or more highly correlated.