A homotopy analysis method for the option pricing PDE in illiquid markets

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading the underlying asset does not affect the underlying asset price. This can happen in perfectly liquid markets and it is evidently not viable in markets with imperfect liquidity (illiquid markets). It is well-known that markets with imperfect liquidity are more realistic. Thus, the presence of price impact while studying options is very important. This paper investigates a solution for the option pricing PDE in illiquid markets using the homotopy analysis method.

Original languageEnglish
Title of host publicationNumerical Analysis and Applied Mathematics, ICNAAM 2012 - International Conference of Numerical Analysis and Applied Mathematics
Pages1870-1873
Number of pages4
Edition1
DOIs
Publication statusPublished - 2012
EventInternational Conference of Numerical Analysis and Applied Mathematics, ICNAAM 2012 - Kos, Greece
Duration: Sep 19 2012Sep 25 2012

Publication series

NameAIP Conference Proceedings
Number1
Volume1479
ISSN (Print)0094-243X
ISSN (Electronic)1551-7616

Other

OtherInternational Conference of Numerical Analysis and Applied Mathematics, ICNAAM 2012
Country/TerritoryGreece
CityKos
Period9/19/129/25/12

Keywords

  • Options pricing
  • homotopy analysis method
  • illiquid markets

ASJC Scopus subject areas

  • Physics and Astronomy(all)

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