Spread Option Pricing with Finite Liquidity

We discuss the pricing and hedging of European spread options on correlated assets when, incontrast to the standard framework and consistent with a market with imperfect liquidity,the option trader's trading in the stock market has a direct impact on one of the stocksprice. We consider a full

Keywords:

Spread option , Price impact , Illiquid markets , Nonlinear nance , Asymptotic analysis , Peaceman-Rachford scheme