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.

Education

MSc programme in Economics – elective course
MSc programme in mathematics-economics

 

The PhD Programme in Economics at the Department of Economics - elective course with research module. PhD students must contact the study administration and the lecturer in order to register for the research module.

 

Learning outcome

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

 

Competencies

  • 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.

Thierry Foucault, Marco Pagano and Ailsa Röell: “Market Liquidity: Theory Evidence and Policy,” Oxford University Press, 2013. 439 pages.

Various papers that will be announced later.

The course builds mainly on basic Finance, such as may be acquired in the course Corporate Finance and Incentives. We also employ the modelling skills from the bachelor’s courses in Micro.

Schedule:
2 hours lectures one to two times a week from week 6 to 20 (except holidays).

The overall schema can be seen at KUnet:
MSc in Economics => "courses and teaching" => "Planning and overview" => "Your timetable"
KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"

Timetable and venue:
To see the time and location of lectures please press the link under "Se skema" (See schedule) at the right side of this page (F means Spring).

You can find the similar information in English at
https:/​/​skema.ku.dk/​ku1920/​uk/​module.htm
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F20; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Forår/Spring – Week 5-30”
Press: “ View Timetable”

Oral
Collective

 

The lecturer gives collective oral feedback during lectures and individual oral feedback upon request.

ECTS
7,5 ECTS
Type of assessment
Written assignment, 12 hours
individual take-home exam. It is not allowed to collaborate on the assignment with anyone.
The exam assignment is in English and must be answered in English.
____
Aid
All aids allowed
Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
____
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.

 

To receive the top grade, 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.

Single subject courses (day)

  • Category
  • Hours
  • Exam
  • 12
  • Preparation
  • 124
  • Lectures
  • 42
  • Class Exercises
  • 28
  • English
  • 206