Pirvu, Traian A.; Zhang, Shuming - In: Risks : open access journal 12 (2024) 11, pp. 1-14
This work explores a finite liquidity model to price spread options and assess the liquidity impact. We employ Kirk approximation for computing the spread option price and its delta. The latter is needed since the liquidity impact is caused by the delta hedging of a large investor. Our main...