040442 EK KFK FM: Market Microstructure (2016W)
Continuous assessment of course work
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Prerequisites
A basic knowledge of finance and microeconomic theory is required. Some prior knowledge in statistics, probability theory and econometrics is also necessary.
I will assume that you took or are currently taking Principles of Finance (040638) and Empirical Finance (040514).
A basic knowledge of finance and microeconomic theory is required. Some prior knowledge in statistics, probability theory and econometrics is also necessary.
I will assume that you took or are currently taking Principles of Finance (040638) and Empirical Finance (040514).
Registration/Deregistration
- Registration is open from Mo 12.09.2016 09:00 to Th 22.09.2016 14:00
- Deregistration possible until Fr 14.10.2016 14:00
Details
max. 80 participants
Language: English
Lecturers
Classes (iCal) - next class is marked with N
The course will take place on Tuesdays 15.00-18.15 (SR14 OMP). If you missed the registration period you can register in the first class (04.10).
Tuesday
04.10.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
11.10.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
18.10.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
25.10.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Thursday
03.11.
13:15 - 16:30
Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
08.11.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
15.11.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
22.11.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
29.11.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Thursday
01.12.
15:05 - 16:30
PC-Seminarraum 3 Oskar-Morgenstern-Platz 1 1.Untergeschoß
Thursday
01.12.
16:45 - 18:10
Seminarraum 1 Oskar-Morgenstern-Platz 1 Erdgeschoß
Tuesday
13.12.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
10.01.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
17.01.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
24.01.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday
31.01.
15:00 - 18:15
Seminarraum 14 Oskar-Morgenstern-Platz 1 2.Stock
Information
Aims, contents and method of the course
Assessment and permitted materials
The grade will be based on the written midterm and the final exams (40% each), a small empirical project, homework exercises and class participation (the remaining 20%). The exams are most likely will be open-book (you are allowed to use any paper materials and a calculator). The final score of 50% or more of the maximum points will be sufficient for a positive grade. Attendance is generally required.
Minimum requirements and assessment criteria
The course provides an introduction into the price discovery in real financial markets. We often assume that markets are perfect; the equilibrium price reflects a fair valuation of an asset's expected payoff and the exact trading mechanics is irrelevant. Real markets though are far from perfect. Various frictions could lead to significant deviations of the transaction prices from the theoretical equilibrium values. In the course we will study how trading is organized at the major financial markets and how prices are determined.
An important subject of the course is the concept of liquidity. We will talk about what it means for markets to be liquid, what determines market liquidity and how market liquidity is related to asset valuations. In addition, we will discuss the most important market design and regulatory issues such as market transparency, market fragmentation, high-frequency and algorithmic trading.
The course considers specific trading mechanisms and involves some work with real financial data. However, the main focus of the course is not on the particular institutional details of the trading process, but on the main economic mechanisms that govern markets' behavior.
This course is held in English and all examinations are in English. It is a required course for a specialization (KFK) in Financial Markets. It also counts as an elective for specializations (KFK) in Corporate Finance, Financial Institutions, and Financial Services.
An important subject of the course is the concept of liquidity. We will talk about what it means for markets to be liquid, what determines market liquidity and how market liquidity is related to asset valuations. In addition, we will discuss the most important market design and regulatory issues such as market transparency, market fragmentation, high-frequency and algorithmic trading.
The course considers specific trading mechanisms and involves some work with real financial data. However, the main focus of the course is not on the particular institutional details of the trading process, but on the main economic mechanisms that govern markets' behavior.
This course is held in English and all examinations are in English. It is a required course for a specialization (KFK) in Financial Markets. It also counts as an elective for specializations (KFK) in Corporate Finance, Financial Institutions, and Financial Services.
Examination topics
Reading list
Thierry Foucault, Marco Pagano and Ailsa Röell: "Market Liquidity: Theory, Evidence, and Policy", 2013
Joel Hasbrouck:"Empirical Market Microstructure", 2007
Larry Harris:"Trading and Exchanges", 2002
Barry Johnson:"Algorithmic Trading and DMA", 2010
Joel Hasbrouck:"Empirical Market Microstructure", 2007
Larry Harris:"Trading and Exchanges", 2002
Barry Johnson:"Algorithmic Trading and DMA", 2010
Association in the course directory
Last modified: Mo 07.09.2020 15:29
2. The Concept of Liquidity. Measuring Liquidity
3. Determinants of Market Liquidity
a. Transactions Costs
b. Inventory Risk
c. Asymmetric Information
4. Empirical Models of Market Microstructure
5. Limit Order Book Markets
6. Liquidity and Asset Prices
7. Market Fragmentation
8. Transparency and Dark Liquidity
9. High Frequency Trading