Financial Regulation and Governance

Liquidity, price discovery, and market design

03/06/2019 - 05/06/2019

Location

Florence

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Level

Intermediate

Approach

Quantitative

Delivery mode

Residential

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This course covers standard models of price discovery and asset illiquidity in financial markets. It will discuss how and why trades impact asset prices, relating this impact to asymmetric information, inventory holding costs for intermediaries (e.g., securities dealers), and market design (transparency, inter-market competition, matching rules, high frequency trading etc.). It will also present empirical techniques to assess the contribution of these factors to securities illiquidity and price volatility.

You will learn an understanding of the various frictions affecting the liquidity of an asset.
You will learn how to use data to measure the relative contribution of these frictions to illiquidity.
You will learn how to study the effect of changes in market structure on measures of market quality (e.g., liquidity, priced discovery, volatility)
You will learn an understanding of current policy debates on the organization of trading in securities markets (high frequency trading, market transparency, centralization vs. decentralization of trading).
You will learn why illiquidity, price discovery and volatility are related concepts.

Thierry Foucault

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