Numerical analysis and computing for option pricing models in illiquid markets

Nowadays market liquidity has become an issue of very high concern in financial risk management. This paper deals with the numerical analysis and computing of nonlinear models of option pricing that appear when illiquid market effects are taken into account. A consistent monotone finite difference scheme is proposed and a relationship between the discretization step size is obtained, ensuring nonnegative and stable numerical solutions and avoiding spurious oscillations.