We study methods that can potentially be used for estimating the value of European options on individual stocks in markets in where such products are not actively traded. The study is motivated by the frequent need for market participants to provide quotes for such options in extremely illiquid...

We develop a finite difference approach for valuing a discretely sampled variance swap in the local volatility setting of Dupire and Derman amp; Kani. This method incorporates the observed volatility skew and is capable of handling various definitions of the variance.The method is based on...