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Market Microstructure

  • Teacher(s):
  • Course given in: English
  • ECTS Credits:
  • Schedule: Autumn Semester 2018-2019, 2.0h. course + 1.0h exercices (weekly average)
      WARNING :   this is an old version of the syllabus, old versions contain   OBSOLETE   data.
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Objectives

Students will learn the design and features of modern markets, and basic concepts of market microstructure: liquidity, market depth, price informativeness, bid-ask spreads, lambdas, PIN and VPIN, microstructure invariance, tick sizes. The course will be based on the theoretical models: Roll, Kyle, Ho and Stoll, Glosten and Milgrom, as well as most recent work in select areas of the field. Both theory and empirical techniques will be covered. Students will see how the insights of models apply in practice and allow market participants to design their trading strategies and account for short-term price movements, understand how private information gets impounded into prices, recognize market failures and modern regulatory issues.

Contents

The course is structured around the following list of 5 topics:

1. Trading mechanisms and measuring liquidity

2. Price discovery and market depth

3. Limit order book markets

4. Fragmentation and transparency

5. Market design and regulatory issues

References

The primary textbook reference:

Thierry Foucault, Marco Pagano, Ailsa Roell, "Market Liquidity: Theory, Evidence, and Policy", Oxford University Press, 2013. (Foucault, Pagano, Roell 2013)

Additional textbook references:

Joel Hasbrouck, "Empirical Market Microstructure", Oxford University Press, 2007. (Hasbrouck 2007)

Larry Harris, "Trading and Exchanges: Market Microstructure for Practitioners", Oxford University Press, 2003. (Harris 2003)

Pre-requisites

Mathematics for Economics and Finance

Introduction to Finance

Evaluation

First attempt

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Retake

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