Financial Markets Microstructure

 

Overview

The purpose of the course is to acquaint students with market microstructure. Market microstructure has grown rapidly as one of the most important field of Finance. The goal of this discipline is to provide a micro-analysis of the trading process in financial markets. This course will expose the market microstructure approach to security prices formation by presenting  selected models that are used in market microstructure

 

Content

• Introduction (Slides and references)
  •  Amuann (1976), Milgrom and Stokey(1982)
• Auctions Slides , stochastic orders Interdependent values
  • Milgrom and Weber (1982)

Quote driven Market static models (Slides)

• Dealers’ inventories. Biais (1993)
• Informed non-strategic traders Glosten and Milgrom (1985)
• Informed strategic trader Kyle (1985)
• Informed dealers  Clacagno and Lovo (2006)

 

• Market Efficiency and rational herding and Belief-free (slides)
  • Avery and Zemsky (1995), Decamps and Lovo (2006), Park and Sabourian (2011)
• Robust price formation
  • Hörner, Lovo, Tomala (2018)
• Limit order markets (Slides)
  • Glosten (1994), Fouacult (1999)

Readings
Some problems from past exams

 

Textbooks:

T. Foucault, M. Pagano and A  Roëll,  Market LIquidity, Oxford University Press.
M. O'Hara, Market Microstructure, Blackwell Publishing.
V. Krishna, Auction Theory, Academic Press.