Market Microstructure Theory
Exam number: 3040
Semester: from 1st semester
Duration of the module: One semester
Form of the module (i.e. obligatory, elective etc.): Elective
Frequency of module offer: Each third semester
Prerequisites: Fundamentals of Microeconomics, Statistics, Mathematics and Capital Market Theory.
Applicability of module for other study programmes:
Obligatory or elective in other study programmes. For further information check regulations of the study programme.
Person responsible for module: Prof. Dr. Karl L. Keiber
Name of the professor: Prof. Dr. Karl L. Keiber
Language of teaching: English
ECTS-Credits (based on the workload): 6
Workload and its composition (self-study, contact time):
Contact time (lecture, tutorials, seminar etc.) 33,75 h; self-study: 146,25 h
Contact hours (per week in semester): 3
Methods and duration of examination:
Successful written exam (120 min)
Emphasis of the grade for the final grade: Please check regulations of the study programme
Aim of the module (expected learning outcomes and competencies to be acquired):
In this course the participants get to know institutional details of real-world exchanges by reviewing the common organizational features of these securities markets. Additionally, the participants will study theoretical approaches that help to understand the functioning of securities markets. Basically, this course provides the participants with a look in the black box of price formation in securities markets.
Contents of the module:
Market microstructure is the study of the process and outcomes of exchanging assets under explicit trading rules. This course restricts to the most active area of research in market microstructure, namely the trading of securities especially in secondary stock markets.
- Aspects of Securities Trading
- Inventory-Based Models of the Bid-Ask Spread
- Information-Based Models of the Bid-Ask Spread
- Price Discovery and Gradual Information Revelation in Securities Markets
- Methods for Measuring the Bid-Ask Spread
Teaching and learning methods:
Lecture with tutorials, self-studies
Literature (compulsory reading, recommended literature):
De Jong, Frank and Barbara Rindi, The Microstructure of Financial Markets, Cambridge University Press, Cambridge, 2009. Chaps. 1, 3-5.
Foucault, Thierry, Marco Pagano, and Ailsa Roell, Market Liquidity - Theory, Evidence, and Policy, Oxford University Press, Oxford, 2013. Chaps. 1-4.
O'Hara, Maureen, Market Microstructure Theory, Blackwell, Oxford, 1995. Chaps. 1-4.
McInish, Thomas H., Capital Markets - A Global Perspective, Blackwell, Oxford, 2000. Chaps 1-4.
Harris, Lawrence E., Trading and Exchanges, Oxford University Press, Oxford, 2002.
Registration in Moodle Viadrina required.