Pricing Options in an Extended Black Scholes Economy with Illiquidity: Theory and Empirical Evidence

• المؤلفون الرئيسيون: Cetin, Umut, Jarrow, Robert, Protter, Mitchell, WARACHKA, Mitchell
• التنسيق: text
• اللغة: English
• منشور في: Institutional Knowledge at Singapore Management University 2010
• الموضوعات: Option Pricing; Liquidity; Black Scholes; Finance and Financial Management; Portfolio and Security Analysis
• الوصول للمادة أونلاين: https://ink.library.smu.edu.sg/lkcsb_research/2787; https://ink.library.smu.edu.sg/context/lkcsb_research/article/3786/viewcontent/Pricing_Options_RFS_5959_av.pdf

This article studies the pricing of options in an extended Black Scholes economy in which the underlying asset is not perfectly liquid. The resulting liquidity risk is modeled as a stochastic supply curve, with the transaction price being a function of the trade size. Consistent with the market micr...