25885 Market Microstructure

Description

This course provides an introduction to the field of market microstructure. It covers microstructure theory, the current state of practice in market design/regulation and empirical models/methods used in microstructure research. Classic models of the trading process are discussed, describing the interaction of different types of traders, the nature of adverse selection, the effects of inventory management by liquidity providers, the causes of variation in liquidity, and the process by which information becomes reflected in prices. Also discussed is market design and how it affects the functioning of markets. This includes topical issues such as fragmentation of markets, transparency and automated/high-frequency trading. The subject places market microstructure in the broader context of finance by reviewing how market microstructure impacts on asset pricing and corporate finance decisions.