市场流动性
流动性风险
贴现
计量经济学
趋同(经济学)
市场影响
资产(计算机安全)
经济
数学
数理经济学
计算机科学
市场微观结构
订单(交换)
财务
计算机安全
经济增长
作者
Puneet Pasricha,Song‐Ping Zhu,Xin‐Jiang He
标识
DOI:10.1016/j.eswa.2021.116128
摘要
In this paper, the impact of liquidity on the underlying asset is taken into account when pricing European options through a discounting factor which depends on two factors, i.e., market liquidity risk modeled as a mean-reverting stochastic process and the sensitivity of the underlying to market liquidity. A closed-form pricing formula for liquidity-adjusted European options is derived in the form of an infinite series using Karhunen–Loève expansion for the Ornstein–Uhlenbeck process. The convergence of the series solution is theoretically proved to guarantee closedness so that market practitioners can adopt the new formula when they need to account in market liquidity risk. The speed of convergence is demonstrated through numerical experiments. Finally, the accuracy of the newly derived formula is shown by comparing option prices calculated with our formula and those obtained from Monte-Carlo simulation, and various properties of our formula are also investigated.
科研通智能强力驱动
Strongly Powered by AbleSci AI