# Department of Economics and Related Studies Financial Market Microstructure. Topic 1 : Overview and Fixed Cost Models of Spreads

Save this PDF as:

Size: px
Start display at page:

Download "Department of Economics and Related Studies Financial Market Microstructure. Topic 1 : Overview and Fixed Cost Models of Spreads"

## Transcription

2 2 Market Efficiency Oneissuethatwillarisefrequentlyinthemodelsthatwelookatisthe question of whether a financial market is efficient. The classic reference on this is Fama s survey in 1970 where he wrote: A market in which prices always fully reflect available information in called efficient. One way of assessing this is to ask whether hypothetical trading based on a specific information set would earn superior returns. A set of information sets and definitions referred to by Fama is: Weak-form Efficiency: The information set includes only past prices themselves. Semi-strong Efficiency: The information set includes all information known to all market participants (publicly available information eg macro data series, other prices and returns). Strong-form Efficiency: The information set includes all information known to any market participant (private information). Often in the models that we will look at we will examine the question of whether the behaviour that is implied by the models concerned implies market efficiency and of what type. Given the nature of the data that are examined and the processes of trading that are modelled, there may be issues of timing or how the accumulation of information is reflected in prices. 3 The Canonical Model of a Dealer Market with Fixed Costs 3.1 Roll Model Structure This initial model lays out some of the basic of microstructure theory. The Roll (1984) model appears in a number of guises throughout the course. We assume that markets are efficient in the sense that prices reflect all available information. The efficient price is m t which can be thourght of as reflectingallavailableinformationandbethepricethat would hold in the absence of any transactions costs. We assume that is therefore moves through time as: m t = m t 1 + u t (1) where u t is a random error or innovation term which will reflect the innovation in expectations in an efficient market. Trading in this market is assumed to operate through dealers who post bid (b t ) and ask (a t ) 2

### The (implicit) cost of equity trading at the Oslo Stock Exchange. What does the data tell us?

The (implicit) cost of equity trading at the Oslo Stock Exchange. What does the data tell us? Bernt Arne Ødegaard Sep 2008 Abstract We empirically investigate the costs of trading equity at the Oslo Stock

### Financial Market Microstructure Theory

The Microstructure of Financial Markets, de Jong and Rindi (2009) Financial Market Microstructure Theory Based on de Jong and Rindi, Chapters 2 5 Frank de Jong Tilburg University 1 Determinants of the

### Decimalization and market liquidity

Decimalization and market liquidity Craig H. Furfine On January 29, 21, the New York Stock Exchange (NYSE) implemented decimalization. Beginning on that Monday, stocks began to be priced in dollars and

### Asymmetric Information (2)

Asymmetric nformation (2) John Y. Campbell Ec2723 November 2013 John Y. Campbell (Ec2723) Asymmetric nformation (2) November 2013 1 / 24 Outline Market microstructure The study of trading costs Bid-ask

### Financial Markets. Itay Goldstein. Wharton School, University of Pennsylvania

Financial Markets Itay Goldstein Wharton School, University of Pennsylvania 1 Trading and Price Formation This line of the literature analyzes the formation of prices in financial markets in a setting

### Supervised Learning of Market Making Strategy

Supervised Learning of Market Making Strategy Ori Gil Gal Zahavi April 2, 2012 Abstract Many economic markets, including most major stock exchanges, employ market-makers to aid in the transactions and

### Financial Econometrics and Volatility Models Introduction to High Frequency Data

Financial Econometrics and Volatility Models Introduction to High Frequency Data Eric Zivot May 17, 2010 Lecture Outline Introduction and Motivation High Frequency Data Sources Challenges to Statistical

### An Empirical Analysis of the Relation Between Option Market Liquidity and Stock Market Activity

An Empirical Analysis of the Relation Between Option Market Liquidity and Stock Market Activity Iskra Kalodera Christian Schlag This version: November 25, 2003 Graduate Program Finance and Monetary Economics,

### Trading for News: an Examination of Intraday Trading Behaviour of Australian Treasury-Bond Futures Markets

Trading for News: an Examination of Intraday Trading Behaviour of Australian Treasury-Bond Futures Markets Liping Zou 1 and Ying Zhang Massey University at Albany, Private Bag 102904, Auckland, New Zealand

### PITFALLS IN TIME SERIES ANALYSIS. Cliff Hurvich Stern School, NYU

PITFALLS IN TIME SERIES ANALYSIS Cliff Hurvich Stern School, NYU The t -Test If x 1,..., x n are independent and identically distributed with mean 0, and n is not too small, then t = x 0 s n has a standard

### Market Microstructure: An Interactive Exercise

Market Microstructure: An Interactive Exercise Jeff Donaldson, University of Tampa Donald Flagg, University of Tampa ABSTRACT Although a lecture on microstructure serves to initiate the inspiration of

### Autocorrelation in Daily Stock Returns

Autocorrelation in Daily Stock Returns ANÓNIO CERQUEIRA ABSRAC his paper examines the roles of spread and gradual incorporation of common information in the explanation of the autocorrelation in daily

### Financial Risk Management Exam Sample Questions/Answers

Financial Risk Management Exam Sample Questions/Answers Prepared by Daniel HERLEMONT 1 2 3 4 5 6 Chapter 3 Fundamentals of Statistics FRM-99, Question 4 Random walk assumes that returns from one time period

### Market Microstructure. Hans R. Stoll. Owen Graduate School of Management Vanderbilt University Nashville, TN 37203 Hans.Stoll@Owen.Vanderbilt.

Market Microstructure Hans R. Stoll Owen Graduate School of Management Vanderbilt University Nashville, TN 37203 Hans.Stoll@Owen.Vanderbilt.edu Financial Markets Research Center Working paper Nr. 01-16

### A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices

A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices Shane A. Corwin and Paul Schultz * * Both authors are from the Mendoza College of Business at the University of Notre Dame. We are

### Dealing with Negative Values in the High-Low Spread Estimator

Dealing with Negative Values in the High-Low Spread Estimator A Comment On Pricing of Liquidity Risks: Evidence from Multiple Liquidity Measures by Soon-Ho Kim and Kuan-Hui Lee, Journal of Empirical Finance

### Problem Set 1 Foundations of Financial Markets Instructor: Erin Smith Summer 2011 Due date: Beginning of class, May 31

Problem Set Foundations of Financial Markets Instructor: Erin Smith Summer 20 Due date: Beginning of class, May 3. Suppose the debt holders of a cosmetics firm hold debt with a face value of \$500,000.

### Underlier Filters Category Data Field Description

Price//Capitalization Market Capitalization The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Market Capitalization is not applicable

### Some Evidence that a Tobin Tax on Foreign Exchange Transactions may Increase Volatility

Some Evidence that a Tobin Tax on Foreign Exchange Transactions may Increase Volatility Robert Z. Aliber, Bhagwan Chowdhry and Shu Yan Revised: June 2003 1 Aliber is at the University of Chicago, Chowdhry

### Financial Assets Behaving Badly The Case of High Yield Bonds. Chris Kantos Newport Seminar June 2013

Financial Assets Behaving Badly The Case of High Yield Bonds Chris Kantos Newport Seminar June 2013 Main Concepts for Today The most common metric of financial asset risk is the volatility or standard

### THE INTRADAY PATTERN OF INFORMATION ASYMMETRY: EVIDENCE FROM THE NYSE

THE INTRADAY PATTERN OF INFORMATION ASYMMETRY: EVIDENCE FROM THE NYSE A Thesis Submitted to The College of Graduate Studies and Research in Partial Fulfillment of the Requirements for the Degree of Master

### SAMPLE MID-TERM QUESTIONS

SAMPLE MID-TERM QUESTIONS William L. Silber HOW TO PREPARE FOR THE MID- TERM: 1. Study in a group 2. Review the concept questions in the Before and After book 3. When you review the questions listed below,

### Finance 400 A. Penati - G. Pennacchi Market Micro-Structure: Notes on the Kyle Model

Finance 400 A. Penati - G. Pennacchi Market Micro-Structure: Notes on the Kyle Model These notes consider the single-period model in Kyle (1985) Continuous Auctions and Insider Trading, Econometrica 15,

### On the Efficiency of Competitive Stock Markets Where Traders Have Diverse Information

Finance 400 A. Penati - G. Pennacchi Notes on On the Efficiency of Competitive Stock Markets Where Traders Have Diverse Information by Sanford Grossman This model shows how the heterogeneous information

### Components of the Bid-Ask Spread and Variance: A Unified. Approach

Components of the Bid-Ask Spread and Variance: A Unified Approach Björn Hagströmer, Richard Henricsson and Lars Nordén Abstract We develop a structural model for price formation and liquidity supply of

### Futures Price d,f \$ 0.65 = (1.05) (1.04)

24 e. Currency Futures In a currency futures contract, you enter into a contract to buy a foreign currency at a price fixed today. To see how spot and futures currency prices are related, note that holding

### TOWARDS A THEORY OF HETEROGENEOUS MARKETS

12 TOWARDS A THEORY OF HETEROGENEOUS MARKETS At the end of this in-depth review of some of the techniques and models used with high frequency data, there is a clear evidence that foreign exchange and other

### Discussion of Momentum and Autocorrelation in Stock Returns

Discussion of Momentum and Autocorrelation in Stock Returns Joseph Chen University of Southern California Harrison Hong Stanford University Jegadeesh and Titman (1993) document individual stock momentum:

### Answers to Concepts in Review

Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,

### FINANCIAL MARKETS GROUP AN ESRC RESEARCH CENTRE

Daily Closing Inside Spreads and Trading Volumes Around Earning Announcements By Daniella Acker Matthew Stalker and Ian Tonks DISCUSSION PAPER 404 February 2002 FINANCIAL MARKETS GROUP AN ESRC RESEARCH

### A Simple Model for Intra-day Trading

A Simple Model for Intra-day Trading Anton Golub 1 1 Marie Curie Fellow, Manchester Business School April 15, 2011 Abstract Since currency market is an OTC market, there is no information about orders,

### Market Microstructure & Trading Universidade Federal de Santa Catarina Syllabus. Email: rgencay@sfu.ca, Web: www.sfu.ca/ rgencay

Market Microstructure & Trading Universidade Federal de Santa Catarina Syllabus Dr. Ramo Gençay, Objectives: Email: rgencay@sfu.ca, Web: www.sfu.ca/ rgencay This is a course on financial instruments, financial

### Price Dispersion. Ed Hopkins Economics University of Edinburgh Edinburgh EH8 9JY, UK. November, 2006. Abstract

Price Dispersion Ed Hopkins Economics University of Edinburgh Edinburgh EH8 9JY, UK November, 2006 Abstract A brief survey of the economics of price dispersion, written for the New Palgrave Dictionary

### Forward Contracts and Forward Rates

Forward Contracts and Forward Rates Outline and Readings Outline Forward Contracts Forward Prices Forward Rates Information in Forward Rates Reading Veronesi, Chapters 5 and 7 Tuckman, Chapters 2 and 16

### Testimony on H.R. 1053: The Common Cents Stock Pricing Act of 1997

Testimony on H.R. 1053: The Common Cents Stock Pricing Act of 1997 Lawrence Harris Marshall School of Business University of Southern California Presented to U.S. House of Representatives Committee on

### FIN 432 Investment Analysis and Management Review Notes for Midterm Exam

FIN 432 Investment Analysis and Management Review Notes for Midterm Exam Chapter 1 1. Investment vs. investments 2. Real assets vs. financial assets 3. Investment process Investment policy, asset allocation,

### Marketing Mix Modelling and Big Data P. M Cain

1) Introduction Marketing Mix Modelling and Big Data P. M Cain Big data is generally defined in terms of the volume and variety of structured and unstructured information. Whereas structured data is stored

### A Trading Strategy Based on the Lead-Lag Relationship of Spot and Futures Prices of the S&P 500

A Trading Strategy Based on the Lead-Lag Relationship of Spot and Futures Prices of the S&P 500 FE8827 Quantitative Trading Strategies 2010/11 Mini-Term 5 Nanyang Technological University Submitted By:

### A new model of a market maker

A new model of a market maker M.C. Cheung 28786 Master s thesis Economics and Informatics Specialisation in Computational Economics and Finance Erasmus University Rotterdam, the Netherlands January 6,

### Liquidity of Corporate Bonds

Liquidity of Corporate Bonds Jack Bao, Jun Pan and Jiang Wang MIT October 21, 2008 The Q-Group Autumn Meeting Liquidity and Corporate Bonds In comparison, low levels of trading in corporate bond market

### Fixed odds bookmaking with stochastic betting demands

Fixed odds bookmaking with stochastic betting demands Stewart Hodges Hao Lin January 4, 2009 Abstract This paper provides a model of bookmaking in the market for bets in a British horse race. The bookmaker

### High Frequency Quoting, Trading and the Efficiency of Prices. Jennifer Conrad, UNC Sunil Wahal, ASU Jin Xiang, Integrated Financial Engineering

High Frequency Quoting, Trading and the Efficiency of Prices Jennifer Conrad, UNC Sunil Wahal, ASU Jin Xiang, Integrated Financial Engineering 1 What is High Frequency Quoting/Trading? How fast is fast?

### Journal Of Financial And Strategic Decisions Volume 9 Number 2 Summer 1996

Journal Of Financial And Strategic Decisions Volume 9 Number 2 Summer 1996 THE USE OF FINANCIAL RATIOS AS MEASURES OF RISK IN THE DETERMINATION OF THE BID-ASK SPREAD Huldah A. Ryan * Abstract The effect

### Nasdaq Trading and Trading Costs: 1993 2002

The Financial Review 40 (2005) 281--304 Nasdaq Trading and Trading Costs: 1993 2002 Bonnie F. Van Ness University of Mississippi Robert A. Van Ness University of Mississippi Richard S. Warr North Carolina

### René Garcia Professor of finance

Liquidity Risk: What is it? How to Measure it? René Garcia Professor of finance EDHEC Business School, CIRANO Cirano, Montreal, January 7, 2009 The financial and economic environment We are living through

### Market Maker Inventories and Stock Prices

Capital Market Frictions Market Maker Inventories and Stock Prices By Terrence Hendershott and Mark S. Seasholes* Empirical studies linking liquidity provision to asset prices follow naturally from inventory

### CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS

CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS PROBLEM SETS 1. The correlation coefficient between stock returns for two non-overlapping periods should be zero. If not, one could use returns from one period

### Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC

Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC www.optionseducation.org 2 The Options Industry Council Options involve risks and are not suitable for everyone. Prior to buying

### INCORPORATION OF LIQUIDITY RISKS INTO EQUITY PORTFOLIO RISK ESTIMATES. Dan dibartolomeo September 2010

INCORPORATION OF LIQUIDITY RISKS INTO EQUITY PORTFOLIO RISK ESTIMATES Dan dibartolomeo September 2010 GOALS FOR THIS TALK Assert that liquidity of a stock is properly measured as the expected price change,

### Stock market simulation with ambient variables and multiple agents

Stock market simulation with ambient variables and multiple agents Paolo Giani Cei 0. General purposes The aim is representing a realistic scenario as a background of a complete and consistent stock market.

### FINANCIAL ECONOMICS OPTION PRICING

OPTION PRICING Options are contingency contracts that specify payoffs if stock prices reach specified levels. A call option is the right to buy a stock at a specified price, X, called the strike price.

### UNIVERSITÀ DELLA SVIZZERA ITALIANA MARKET MICROSTRUCTURE AND ITS APPLICATIONS

UNIVERSITÀ DELLA SVIZZERA ITALIANA MARKET MICROSTRUCTURE AND ITS APPLICATIONS Course goals This course introduces you to market microstructure research. The focus is empirical, though theoretical work

### Volatility Dispersion Presentation for the CBOE Risk Management Conference

Volatility Dispersion Presentation for the CBOE Risk Management Conference Izzy Nelken 3943 Bordeaux Drive Northbrook, IL 60062 (847) 562-0600 www.supercc.com www.optionsprofessor.com Izzy@supercc.com

### LIQUIDITY AND ASSET PRICING. Evidence for the London Stock Exchange

LIQUIDITY AND ASSET PRICING Evidence for the London Stock Exchange Timo Hubers (358022) Bachelor thesis Bachelor Bedrijfseconomie Tilburg University May 2012 Supervisor: M. Nie MSc Table of Contents Chapter

### Trading Volume and Information Asymmetry Surrounding. Announcements: Australian Evidence

Trading Volume and Information Asymmetry Surrounding Announcements: Australian Evidence Wei Chi a, Xueli Tang b and Xinwei Zheng c Abstract Abnormal trading volumes around scheduled and unscheduled announcements

### Corporate Bond Trading by Retail Investors in a Limit Order. Book Exchange

Corporate Bond Trading by Retail Investors in a Limit Order Book Exchange by Menachem (Meni) Abudy 1 and Avi Wohl 2 This version: May 2015 1 Graduate School of Business Administration, Bar-Ilan University,

### Whether you re new to trading or an experienced investor, listed stock

Chapter 1 Options Trading and Investing In This Chapter Developing an appreciation for options Using option analysis with any market approach Focusing on limiting risk Capitalizing on advanced techniques

### Lecture 1: Asset Allocation

Lecture 1: Asset Allocation Investments FIN460-Papanikolaou Asset Allocation I 1/ 62 Overview 1. Introduction 2. Investor s Risk Tolerance 3. Allocating Capital Between a Risky and riskless asset 4. Allocating

### Who Trades With Whom, and When?

Cornell University School of Hotel Administration The Scholarly Commons Working Papers School of Hotel Administration Collection 6-9-2006 Who Trades With Whom, and When? Pamela C. Moulton Cornell University,

### Two Months in the Life of Several Gilt-edged Market Makers on the London Stock Exchange

Two Months in the Life of Several Gilt-edged Market Makers on the London Stock Exchange Paolo Vitale London School of Economics June 1998 1 Abstract We investigate the micro structure of the UK gilt market

### Pricing and spread components at the Lima Stock Exchange

Pricing and spread components at the Lima Stock Exchange Luis Chávez-Bedoya, Carlos Loaiza Álamo Abstract This paper analyses three aspects of the share market operated by the Lima Stock Exchange: (i)

### A Farewell to Put/Call Parity Dallas Brozik, Marshall University

A Farewell to Put/Call Parity Dallas Brozik, Marshall University Abstract The concept of put/call parity has long been a fundamental tenet of certain asset pricing models. Though some research has examined

### Limit Orders, Depth, and Volatility: Evidence from the Stock Exchange of Hong Kong

THE JOURNAL OF FINANCE VOL. LVI, NO. 2 APRIL 2001 Limit Orders, Depth, and Volatility: Evidence from the Stock Exchange of Hong Kong HEE-JOON AHN, KEE-HONG BAE, and KALOK CHAN* ABSTRACT We investigate

### CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS

CHAPTER 11: THE EFFICIENT MARKET HYPOTHESIS PROBLEM SETS 1. The correlation coefficient between stock returns for two non-overlapping periods should be zero. If not, one could use returns from one period

Program Trading and Intraday Volatility Lawrence Harris University of Southern California George Sofianos James E. Shapiro New York Stock Exchange, Inc. Program trading and intraday changes in the S&P

### SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS. SaviTrading LLP 2013

SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS 1 SaviTrading LLP 2013 2.1.1 Key terms and definitions We will now explain and define the key terms that you are likely come across during your trading careerbefore

### A systemic approach to home loans: Continuous workouts vs. fixed rate contracts (Shiller et al., 2014)

A systemic approach to home loans: Continuous workouts vs. fixed rate contracts (Shiller et al., 2014) Discussion Cristian Badarinza EFA Meeting, Lugano, August 2014 Summary 1. Unexpected house price declines

### The trading mechanism, cross listed stocks: a comparison of the Paris Bourse and SEAQ- International

Int. Fin. Markets, Inst. and Money 13 (2003) 401/417 www.elsevier.com/locate/econbase The trading mechanism, cross listed stocks: a comparison of the Paris Bourse and SEAQ- International Patricia Chelley-Steeley

### General Forex Glossary

General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without

### Aggregate Risk and the Choice Between Cash and Lines of Credit

Aggregate Risk and the Choice Between Cash and Lines of Credit Viral Acharya NYU Stern School of Business, CEPR, NBER Heitor Almeida University of Illinois at Urbana Champaign, NBER Murillo Campello Cornell

### Liquidity Determinants in an Order-Driven Market : Using High Frequency Data from the Saudi Market

2011 International Conference on Economics, Trade and Development IPEDR vol.7 (2011) (2011) IACSIT Press, Singapore Liquidity Determinants in an Order-Driven Market : Using High Frequency Data from the

### EXECUTE SUCCESS. {at work}

EXECUTE SUCCESS TM {at work} VIX T H E C B O E V O L A T I L I T Y I N D E X 1 W H AT I S V I X & W H AT D O E S I T M E A S U R E? T H E I N D U S T R Y S TA N D A R D I N V O L AT I L I T Y MEASUREMENT

### Key Concepts and Skills

Chapter 10 Some Lessons from Capital Market History Key Concepts and Skills Know how to calculate the return on an investment Understand the historical returns on various types of investments Understand

### Electronic vs. Open Outcry: Side-by-Side Trading of KCBT Wheat Futures

Journal of Agricultural and Resource Economics 36(1):48 62 Copyright 2011 Western Agricultural Economics Association vs. Open Outcry: Side-by-Side Trading of KCBT Wheat Futures Samarth Shah and B. Wade

### Algorithmic Trading: Model of Execution Probability and Order Placement Strategy

Algorithmic Trading: Model of Execution Probability and Order Placement Strategy Chaiyakorn Yingsaeree A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy

### Online Appendix to Impatient Trading, Liquidity. Provision, and Stock Selection by Mutual Funds

Online Appendix to Impatient Trading, Liquidity Provision, and Stock Selection by Mutual Funds Zhi Da, Pengjie Gao, and Ravi Jagannathan This Draft: April 10, 2010 Correspondence: Zhi Da, Finance Department,

### Turk s ES ZigZag Day Trading Strategy

Turk s ES ZigZag Day Trading Strategy User Guide 11/15/2013 1 Turk's ES ZigZag Strategy User Manual Table of Contents Disclaimer 3 Strategy Overview.. 4 Strategy Detail.. 6 Data Symbol Setup 7 Strategy

### SLICE ORDER IN TASE STRATEGY TO HIDE?

SLICE ORDER IN TASE STRATEGY TO HIDE? Isabel Tkatch and Zinat Shaila Alam* Department of Finance, J. Mack Robinson College of Business Georgia State University Atlanta, GA 30303 August 21, 2007 ABSTRACT

### Sensex Realized Volatility Index

Sensex Realized Volatility Index Introduction: Volatility modelling has traditionally relied on complex econometric procedures in order to accommodate the inherent latent character of volatility. Realized

### Classification of trade direction for an equity market with price limit and order match: evidence from the Taiwan stock market

Yang-Cheng Lu (Taiwan), Yu-Chen Wei (Taiwan) Investment Management and Financial Innovations, Volume 6, Issue 3, 2009 of trade direction for an equity market with price limit and order match: evidence

### Trading Game Invariance in the TAQ Dataset

Trading Game Invariance in the TAQ Dataset Albert S. Kyle Robert H. Smith School of Business University of Maryland akyle@rhsmith.umd.edu Anna A. Obizhaeva Robert H. Smith School of Business University

### How to Win the Stock Market Game

How to Win the Stock Market Game 1 Developing Short-Term Stock Trading Strategies by Vladimir Daragan PART 1 Table of Contents 1. Introduction 2. Comparison of trading strategies 3. Return per trade 4.

### Board of Governors of the Federal Reserve System. International Finance Discussion Papers. Number 876. September 2006

Board of Governors of the Federal Reserve System International Finance Discussion Papers Number 876 September 2006 An Empirical Analysis of Specialist Trading Behavior at the New York Stock Exchange Sigridur

### Market Efficiency and Behavioral Finance. Chapter 12

Market Efficiency and Behavioral Finance Chapter 12 Market Efficiency if stock prices reflect firm performance, should we be able to predict them? if prices were to be predictable, that would create the

### Lecture 7: Bounds on Options Prices Steven Skiena. http://www.cs.sunysb.edu/ skiena

Lecture 7: Bounds on Options Prices Steven Skiena Department of Computer Science State University of New York Stony Brook, NY 11794 4400 http://www.cs.sunysb.edu/ skiena Option Price Quotes Reading the

### Algorithmic Trading Session 6 Trade Signal Generation IV Momentum Strategies. Oliver Steinki, CFA, FRM

Algorithmic Trading Session 6 Trade Signal Generation IV Momentum Strategies Oliver Steinki, CFA, FRM Outline Introduction What is Momentum? Tests to Discover Momentum Interday Momentum Strategies Intraday

### Lecture 4: The Black-Scholes model

OPTIONS and FUTURES Lecture 4: The Black-Scholes model Philip H. Dybvig Washington University in Saint Louis Black-Scholes option pricing model Lognormal price process Call price Put price Using Black-Scholes

### Liquidity in U.S. Treasury spot and futures markets

Liquidity in U.S. Treasury spot and futures markets Michael Fleming and Asani Sarkar* Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 (212) 720-6372 (Fleming) (212) 720-8943 (Sarkar)

### Understanding Margins

Understanding Margins Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE Jointly published by National Stock Exchange of India Limited

### High-frequency trading in a limit order book

High-frequency trading in a limit order book Marco Avellaneda & Sasha Stoikov October 5, 006 Abstract We study a stock dealer s strategy for submitting bid and ask quotes in a limit order book. The agent

### Some Evidence that a Tobin Tax on Foreign Exchange Transactions May Increase Volatility

European Finance Review 7: 481 510, 2003. 2004 Kluwer Academic Publishers. Printed in the Netherlands. 481 Some Evidence that a Tobin Tax on Foreign Exchange Transactions May Increase Volatility ROBERT

### News Trading and Speed

News Trading and Speed Thierry Foucault, Johan Hombert, and Ioanid Rosu (HEC) High Frequency Trading Conference Plan Plan 1. Introduction - Research questions 2. Model 3. Is news trading different? 4.

### Understanding Margins. Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE

Understanding Margins Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE Jointly published by National Stock Exchange of India Limited

### Sources of Market Making Profits: Man Does Not Live by Spread Alone. Steven Manaster* Virginia Tech. and. Steven C. Mann** Texas Christian University

Sources of Market Making Profits: Man Does Not Live by Spread Alone Steven Manaster* Virginia Tech and Steven C. Mann** Texas Christian University February 1999 * Pamplin College of Business, Virginia

### Trading Costs and Taxes!

Trading Costs and Taxes! Aswath Damodaran Aswath Damodaran! 1! The Components of Trading Costs! Brokerage Cost: This is the most explicit of the costs that any investor pays but it is usually the smallest

### Financial Markets and Institutions Abridged 10 th Edition

Financial Markets and Institutions Abridged 10 th Edition by Jeff Madura 1 12 Market Microstructure and Strategies Chapter Objectives describe the common types of stock transactions explain how stock transactions

### Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate?

Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate? Emily Polito, Trinity College In the past two decades, there have been many empirical studies both in support of and opposing

### Liquidity Intermediation in the Euro Money Market

Liquidity Intermediation in the Euro Money Market Falko Fecht Frankfurt School of Finance and Deutsche Bundesbank Stefan Reitz IfW and QBER, Kiel Bundesbank/SAFE conference, Frankfurt, October 22, 2013