Universität Wien
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040442 EK KFK FM: Market Microstructure (2015W)

8.00 ECTS (4.00 SWS), SPL 4 - Wirtschaftswissenschaften
Continuous assessment of course work

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).
Moodle

Registration/Deregistration

Note: The time of your registration within the registration period has no effect on the allocation of places (no first come, first served).

Details

max. 80 participants
Language: English

Lecturers

Classes (iCal) - next class is marked with N

  • Thursday 08.10. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 15.10. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 22.10. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 29.10. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Saturday 07.11. 09:45 - 13:00 Hörsaal 7 Oskar-Morgenstern-Platz 1 1.Stock
  • Thursday 12.11. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 19.11. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 26.11. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 03.12. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 10.12. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 17.12. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 14.01. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 21.01. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock
  • Thursday 28.01. 13:15 - 16:30 Hörsaal 15 Oskar-Morgenstern-Platz 1 2.Stock

Information

Aims, contents and method of the course

1. Market Structure and Trading Mechanisms
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

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 tentatively scheduled for 19.11.2015 and 28.01.2016 and 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. If you miss the first class (08.10.2015) you need to get my explicit permission in order to attend the course.

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.

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
Frank de Jong, Barbara Rindi: "The Microstructure of Financial Markets", 2009

Association in the course directory

Last modified: Mo 07.09.2020 15:29