2020-2021 Graduate Catalog

FN 907C/908C Market Microstructure

The lecture material in this course reviews the fundamental theories and models of market microstructure such as the inventory model, sequential trading model (e.g., Glosten-Milgrom model, Easley model, O'Hara model), and strategic trading models (e.g., Kyle model) as they apply to markets for equities, currencies, and fixed income securities. The content of the course will also focus on issues related to limit order market, information and price discovery, trading cost and liquidity, and market depth. Using super-high-frequency data, students work with models of the limit-order markets, optimal order execution, optimal order slicing, and maker-versus-taker strategies. Quantitative, technical analyses include stochastic and deterministic trends, momentum, oscillation, arbitrage trading, pair trading, implementation, and methods of back-testing. Students learn to formulate and back-test various trading strategies, developed upon understanding the mechanics of market microstructure.

Credits

3

Prerequisite

FN 902 Investment & Asset Pricing, FN 904 Quantitative Research Methods II (Financial Econometrics), and FN 912 Empirical Methods in Finance