BUS-F635 Market Microstructure
- 15 weeks
- 3 credits
- Prerequisite(s): BUS-F600
Theory and empirical analysis of trading and market making on security exchanges. Examines both trader strategy and market maker strategy. Provides basic theoretical and empirical building blocks. Analyzes a wide variety of applications including trading mechanisms, security design, and market design. Compares security exchange liquidity, informativeness, transparency, and volatility.
SAMPLE COURSE OUTLINE
Part I: Empirical analysis
- Introduction
- TAQ, NBBO, and Liquidity Measures
- Trade Typing
- Liquidity Measurement Problems
- Developing Trends
- The PIN Model
- Information Shares
- Finnish Data
- Matched Samples and LOB Construction
- Commonality
- The Flash Crash
- The Empirical Analysis of Liquidity
- Corporate Bonds
- Options
- Liquidity-adjusted CAPM
- Behavioral Empirics
- Low-Frequency Liquidity Proxies
- The Experimental Approach
- Analysis of Order Data
Part II: Theory
- The Single-Period Kyle Model
- The Multi-Period Kyle Model
- Kyle Extension and Applications
- Inventory
- Limit Order Models
- Optimal Trading Strategy
- Market Liquidity and Funding Liquidity
- Behavioral Theory