Option valuation in markets with finite liquidity under fractional CEV assets
عنوان مقاله: Option valuation in markets with finite liquidity under fractional CEV assets
شناسه ملی مقاله: JR_JMMF-2-2_010
منتشر شده در در سال 1402
شناسه ملی مقاله: JR_JMMF-2-2_010
منتشر شده در در سال 1402
مشخصات نویسندگان مقاله:
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.
خلاصه مقاله:
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.
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.
کلمات کلیدی: Option pricing, Iliquid market, Sinc collocation method, Price impact&lrm
صفحه اختصاصی مقاله و دریافت فایل کامل: https://civilica.com/doc/1600322/