Asset liquidity and the valuation of derivative securities

作者：Jiang Yanan; Marcozzi Michael D^*

来源：Journal of Computational and Applied Mathematics, 2012, 236(17): 4525-4536.

DOI：10.1016/j.cam.2012.05.005

• Liquidity risk
• Option pricing
• Stochastic optional control

We consider the valuation of European-style derivative securities under limited asset liquidity through the dynamic management of a portfolio of assets effected through continuous transaction. The valuation arises from the optimal realization of a performance index relative to the set of all feasible portfolio trajectories. An approximation procedure based upon the method-of-lines finite element method is developed and analyzed; numerical examples are presented in order to demonstrate the viability of the approach.

• 出版日期2012-11