Asset liquidity and the valuation of derivative securities

• Autores: Yanan Jiang, Michael D. Marcozzi
• Localización: Journal of computational and applied mathematics, ISSN 0377-0427, Vol. 236, Nº 17, 2012, págs. 4525-4536
• Idioma: inglés
• DOI: 10.1016/j.cam.2012.05.005
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• Resumen

  • 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.