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Well-Posedness and Comparison Principle for Option Pricing with Switching Liquidity

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  • Tihomir Gyulov
  • Lyuben Valkov

Abstract

We consider an integro-differential equation derived from a system of coupled parabolic PDE and an ODE which describes an European option pricing with liquidity shocks. We study the well-posedness and prove comparison principle for the corresponding initial value problem.

Suggested Citation

  • Tihomir Gyulov & Lyuben Valkov, 2015. "Well-Posedness and Comparison Principle for Option Pricing with Switching Liquidity," Papers 1502.07622, arXiv.org.
    • Handle: RePEc:arx:papers:1502.07622
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    References listed on IDEAS

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    1. Michael Ludkovski & Qunying Shen, 2013. "European Option Pricing With Liquidity Shocks," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 16(07), pages 1-30.
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