Analytic solution of a nonlinear Black-Scholes equation with price slippage

dc.contributor.author	Esekon, Joseph E
dc.date.accessioned	2016-09-28T16:39:52Z
dc.date.available	2016-09-28T16:39:52Z
dc.date.issued	2016
dc.identifier.uri	http://hdl.handle.net/123456789/111
dc.identifier.uri	https://www.researchgate.net/publication/275242384_Analytic_solution_of_a_nonlinear_Black-Scholes_equation_with_price_slippage
dc.description.abstract	We study a nonlinear Black-Scholes partial differential equation whose nonlinearity is as a result of transaction cost and a price slippage impact that lead to market illiquidity with feedback effects. After reducing the equation into a second-order nonlinear partial differential equation, we find that the assumption of a traveling wave profile to the second-order equation reduces it further to ordinary differential equations. Solutions to all these transformed equations facilitate an analytic solution to the nonlinear Black-Scholes equation. We finally show that the option is always more volatile compared to the stock when 1∓√1−(1− )2 (1− )2 < S0 S ert.	en_US
dc.title	Analytic solution of a nonlinear Black-Scholes equation with price slippage	en_US