A Shidfar - Iran University of Science and Technology
Kh Paryab - Iran University of Science and Technology
A.R Yazdanian - Iran University of Science and Technology

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

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