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Afshin Babaei

Afshin Babaei

Academic rank: Associate Professor
ORCID: https://orcid.org/0000-0002-6980-9786
Education: PhD.
ScopusId: https://www.scopus.com/authid/detail.uri?authorId=57188696707
Faculty: Faculty of Mathematical Sciences
Address: Department of Mathematics, Faculty of Mathematical sciences, University of Mazandaran, Babolsar, Iran
Phone: 011-35302418

Research

Title
Option valuation in markets with finite liquidity under fractional CEV assets
Type
JournalPaper
Keywords
Option pricing, Illiquid market, Sinc collocation method, Price impact.
Year
2022
Journal Journal of Mathematics and Modeling in Finance
DOI
Researchers Azadeh Ghasemifard ، ُSeddighe Banihashemi ، Afshin Babaei

Abstract

The aim of this paper is to numerically price the European double barrier option by calculating the governing fractional Black-Scholes equation in illiquid markets. Incorporating the price impact into the underlying asset dynamic, which means that trading strategies affect the underlying price, we consider markets with - nite liquidity. We survey both cases of rst-order feedback and full feedback. Asset evolution satis es a stochastic differential equation with fractional noise, which is more realistic in markets with statistical dependence. Moreover, the Sinc- collocation method is used to price the option. Numerical experiments show that the results highly correspond to our expectation of illiquid markets.