Numerical Solution of Option Pricing Model under Uncertain Volatility in Illiquid Markets

Abstract

The option pricing model with constant volatility in illiquid markets has been expanded by introducing two uncertain volatility models in this paper volatility. To conquer some insufficient existed in some literature, for example the time step should be small enough to satisfy the stability, the implicit difference equation has been established and numerical solution of the modified model with uncertain volatility has been discussed. Numerical results show that the method is nice and the accurate results can be gained with less computation.