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Option valuation in markets with finite liquidity under fractional CEV assets | ||
Journal of Mathematics and Modeling in Finance | ||
دوره 2، شماره 2، فروردین 2023، صفحه 167-180 اصل مقاله (330.5 K) | ||
نوع مقاله: Research Article | ||
شناسه دیجیتال (DOI): 10.22054/jmmf.2023.15191 | ||
نویسندگان | ||
Azadeh Ghasemifard![]() ![]() ![]() | ||
1University of Mazandaran | ||
2Department of Applied Mathematics, Faculty of Mathematical Sciences, University of Mazandaran, Babolsar, Iran. | ||
3Faculty of Mathematical sciences, University of Mazandaran, Babolsar, Iran. | ||
چکیده | ||
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. | ||
کلیدواژهها | ||
Option pricing؛ Iliquid market؛ Sinc collocation method؛ Price impact&lrm | ||
آمار تعداد مشاهده مقاله: 24 تعداد دریافت فایل اصل مقاله: 33 |