Alexandria Digital Research Library

European Option Pricing in Illiquid Markets

Author:
Shen, Qunying
Degree Grantor:
University of California, Santa Barbara. Statistics and Applied Probability
Degree Supervisor:
Michael Ludkovski
Place of Publication:
[Santa Barbara, Calif.]
Publisher:
University of California, Santa Barbara
Creation Date:
2012
Issued Date:
2012
Topics:
Applied Mathematics, Mathematics, Statistics, and Economics, Finance
Keywords:
Regime switching
Indifference price
Liquidity shock
Transaction cost
Exponential utility maximization
Worst case
Genres:
Dissertations, Academic and Online resources
Dissertation:
Ph.D.--University of California, Santa Barbara, 2012
Description:

In this thesis, we study European option pricing and hedging problem under two incomplete market conditions: (1) with liquidity shocks, and (2) with regime-switching transaction costs. We consider market illiquidity as the inability to trade timely and transaction costs as proportional to the trading (buy/sell) amounts. Working within a Markovian regime-switching setting, we deem the market to have two regimes - one a regular trading regime and the other an illiquid no-trading regime, though in the transaction costs model, we generalize the two regimes to be both regular trading regimes but with different fundamental parameters. The pricing problem is solved by extending the Black-Scholes model in each regime with an extra accommodation for regime switching possibilities. This thesis consists of four chapters.

Physical Description:
1 online resource (203 pages)
Format:
Text
Collection(s):
UCSB electronic theses and dissertations
ARK:
ark:/48907/f3sx6b5w
ISBN:
9781267768292
Catalog System Number:
990039148170203776
Rights:
Inc.icon only.dark In Copyright
Copyright Holder:
Qunying Shen
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