Option valuation in markets with finite liquidity under fractional CEV assets

سال انتشار: 1402
نوع سند: مقاله ژورنالی
زبان: انگلیسی
مشاهده: 76

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تاریخ نمایه سازی: 19 بهمن 1401

چکیده مقاله:

‎The aim of this paper is to numerically price the European double barrier option by calculating the governing fractional Black-Scholes equation in illiquid markets‎. ‎Incorporating the price impact into the underlying asset dynamic‎, ‎which means that trading strategies affect the underlying price‎, ‎we consider markets with finite liquidity‎. ‎We survey both cases of first-order feedback and full feedback‎. ‎Asset evolution satisfies a stochastic differential equation with fractional noise‎, ‎which is more realistic in markets with statistical dependence‎. ‎Moreover‎, ‎the Sinc-collocation method is used to price the option‎. ‎Numerical experiments show that the results highly correspond to our expectation of illiquid markets‎.


Azadeh Ghasemifard

University of Mazandaran

Seddigheh Banihashemi

Department of Applied Mathematics, Faculty of Mathematical Sciences, University of Mazandaran, Babolsar, Iran.

Afshin Babaei

Faculty of Mathematical sciences, University of Mazandaran, Babolsar, Iran.