Financial Markets Microstructure (F)
Course content
This course examines the financial markets from a Micro perspective. How does a “market” as we know it form from individual traders’ actions? How is the market price determined from individual trades and offers? How is the traders’ dispersed information incorporated into these prices? What determines the liquidity and depth of an asset market? What is the optimal behaviour for traders in financial markets? Why do bubbles and crashes arise? Do the institutional details of the exchange influence this price formation process? If so, how should exchanges and regulators ideally design the rules of trading? Is there a role for market making, should the market be fully transparent, should insider trading be permitted, should transactions be taxed, and is high-frequent trading good or bad for the market?
In this course we will address these and related questions. The course seeks to give a broad introduction to the field of Financial Markets Microstructure covering theory, evidence and policy. It also provides deeper insight on topics of current interest on the basis of selected current research papers.
The course partly gives participants a review of the facts on financial markets, partly presents the key theoretical models, and partly addresses how the models are applied to the important issues.
MSc programme
in Economics – elective course
The PhD Programme in Economics at the Department of Economics:
- The course is an elective course with research module. In order to register for the research module and to be able to write the research assignment, the PhD students must contact the study administration AND the lecturer.
The course is open to:
- Exchange and Guest students from abroad
- Credit students from Danish Universities
- Open University students
After completing the course the student is expected to be able to:
Knowledge:
-
Define types of financial markets and their characteristics
-
Account for the standard theoretical models used to model financial markets
-
Discuss current issues in the financial markets literature
Skills:
-
Set up financial market problems as game-theoretic models
-
Analyze price formation in different types of financial markets and derive results on measures such as liquidity and market depth
- Analyze the pros and cons of different market structures seen from the perspectives of different market participants
Competences:
-
Explain and discuss key theoretical concepts from academic articles, as well as discuss their interpretation
-
Apply the most relevant theoretical apparatus to analyze case-based problems
Mostly lectures covering the syllabus with a view towards accomplishing the course goals. Supplemented by problem sets.
Foucault, Thierry, Marco Pagano, and Ailsa Röell. “Market liquidity: theory, evidence, and policy,” (2nd ed.) Oxford University Press, 2024. 536 Pages
Various papers that will be announced later.
The course builds mainly on the knowledge of basic concepts in
Finance (types of financial assets, discounting). Students are
therefore encouraged to have taken a course in finance, such as
"Corporate Finance and Incentives" or "Financial
Decision Making" at the Study of Economics, University of
Copenhagen.
We employ basic game theory, on the level presented in the
Microeconomics III course (or equivalent) at the Study of
Economics, University of Copenhagen. In particular, students are
assumed to be familiar with concepts such as Bayes-Nash equilibrium
and Perfect Bayesian Equilibrium.
The students are encouraged to have followed "Advanced Game
Theory" at the Study of Economics, University of Copenhagen or
to follow it in parallel.
Finally, the course assumes the students have confident grasp of
probability theory, on the level presented in the course
"Probability Theory and Statistics" at the Bachelor in
Economics, University of Copenhagen. In particular, students are
supposed to be familiar with conditional probabilities and the
Bayes' rule, conditional mathematical expectations, and related
topics.
Schedule:
2 hours lectures one to two times a week from week 6 to
20.
The lecturer gives collective oral feedback during lectures and individual oral feedback upon request.
for enrolled students: Rules etc at Master(UK) and Master(DK)
When registered you will be signed up for exam.
- Full-degree students – sign up at Selfservice on KUnet
- Exchange and guest students from abroad – sign up through Mobility Online and Selfservice- read more through this website.
- Credit students from Danish universities - sign up through this website.
- Open University students - sign up through this website.
The dates for the exams are found here Exams – Faculty of Social Sciences - University of Copenhagen (ku.dk)
Please note that it is your own responsibility to check for overlapping exam dates.
- ECTS
- 7,5 ECTS
- Type of assessment
-
Home assignment, 12 hours
- Type of assessment details
- Individual. Max 10 standard pages.
- Examination prerequisites
-
There are no requirements during the course that the student has to fulfill to be able to sit the exam.
- Aid
- All aids allowed
Use of AI tools is permitted. You must explain how you have used the tools. When text is solely or mainly generated by an AI tool, the tool used must be quoted as a source.
- Marking scale
- 7-point grading scale
- Censorship form
- No external censorship
- Exam period
-
Exam information:
The examination date can be found in the exam schedule here
More information is available in Digital Exam from the middle of the semester.
More information about examination, rules, aids etc. at Master (UK) and Master (DK).
- Re-exam
-
Same as the ordinary exam.
Reexam information:
The reexamination date/period can be found in the reexam schedule here
More information in Digital Exam in August.
More info: Master(UK) and Master(DK)
Criteria for exam assessment
Students are assessed on the extent to which they master the learning outcome for the course.
In order to obtain the top grade “12”, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.
In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level of the knowledge, skills and competencies listed in the learning outcomes.
Single subject courses (day)
- Category
- Hours
- Lectures
- 42
- Preparation
- 152
- Exam
- 12
- English
- 206
Kursusinformation
- Language
- English
- Course number
- AØKK08396U
- ECTS
- 7,5 ECTS
- Programme level
- Full Degree Master
Ph.D.
- Duration
-
1 semester
- Placement
- Spring
- Price
-
Information about admission and tuition fee: Master and Exchange Programme, credit students and guest students (Open University)
- Studyboard
- Department of Economics, Study Council
Contracting department
- Department of Economics
Contracting faculty
- Faculty of Social Sciences
Course Coordinator
- Egor Starkov (12-6a6c7477337879667770747b456a68747333707a336970)
Teacher
See ‘Course Coordinators’
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Kursusinformation for indskrevne studerende