Option pricing models typically consider either monopolistic market makers, or infinite competition. Real markets, however, are often dominated by a few large dealers with substantial market power. We study a Stackelberg competition between a finite number of option dealers and a client who wants to sell part of her option position. The dealers quote pricing schedules, based on which the client decides how many options to sell to the dealers.

(Joint work with Bruno Bouchard and Johannes Muhle-Karbe) Speaker(s): Martin Herdegen (Warwick)