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Liquidity, Price Discovery, and Market Design


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  • General description

    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.

  • Topics covered

    • Models of price discovery and illiquidity in financial markets
    • Estimation of adverse selection costs and inventory holding costs
    • Market design and policy (market transparency, algorithmic and high frequency trading, OTC vs. centralized trading)

  • What you will learn

    • 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.

  • How the course will work

    Total course length: 12 hours.

    The course will include lectures as well as practical exercises using the statistical analysis software E.Views. There will be one tutorial session on E.Views and two practical sessions (exercises) using this software (3 hours).

    A certificate of attendance will be provided to all participants after the course.

  • Meet the instructor

    Thierry Foucault is HEC Foundation chaired Professor of Finance at HEC, Paris and a research fellow of the Centre for Economic Policy (CEPR). He has taught in various institutions, including Universitat Pompeu Fabra, Carnegie Mellon University, EPFL, Studienzentrum Gerzensee, Saïd Business School in Oxford, and the Tinbergen Institute. His research focuses on the determinants of financial markets liquidity, the industrial organization of these markets, and their effect on the real economy. He serves or served on the scientific committees of the Autorité des Marchés Financiers (AMF), the Norwegian Finance Initiative (NFI), the Research Foundation of the Banque de France, the Group of Economic Advisors of the Committee of Economic and Markets Analysis of the European Securities and Markets Authority (ESMA). He is currently an Editor of the Review of Asset Pricing Studies, and an Associate Editor of the Journal of Economic Theory, the Journal of Finance, and the Review of Financial Studies. He was co-editor of the Review of Finance from 2009 to 2013. He co-authored, with Marco Pagano and Ailsa Röell, “Market Liquidity: Theory, Evidence, and Policy”, a textbook on market liquidity published by Oxford University Press in 2013.

  • Prerequisites

    Degree in Economics (Msc level or equivalent). Basic knowledge of economics under uncertainty, information economics, and asset pricing is required to follow the course.

    Technical Prerequisites

    Course participants are required to bring a laptop equipped with the statistical software Eviews (version 9.0).

  • Fees

    1750€ – Public Authorities (e.g. National Competent Authorities, Central Banks) and European Institutions

    1900€ – Private Sector

    1000€ – Academics (Assistant, Associate or Full Professors)

    850€ – Students (with certificate of studies)

    The course fee covers coffee and lunch breaks. Travel and hotel costs are not included.


    • In case of registration of 3 participants from the same organisation, the course fee is waived for one of them.
      To benefit from the deal, the names of the 3 participants have to be communicated to fbf@eui.eu before registering. We cannot communicate the names of other registered people from the same institution (it is upon your responsibility to get in touch with your HR division). A single debit note will be issued for the 3 participants followed by one payment.
    • Special deals apply for larger groups.


    • In case a course is cancelled, registered participants will receive the full refund.
    • In case a course is moved to another date, registered participants may request a voucher to attend another FBF course.
    • Registered participants who cancel their participation will receive a voucher to attend another FBF course.

    For more details, please contact fbf@eui.eu
  • Practical information


    Please notice that the course dinner, and most of the social activities, will take place downtown.

    Recommended hotels nearby the EUI:

    Recommended hotels in downtown Florence:

    Suggested restaurants in Florence city centre


    On arrival, participants will be provided with temporary wi-fi access for the whole duration of the course.

    Privacy Notice

    The personal information you have provided will be processed in compliance with the EUI Privacy Statement for conferences. For general queries: fbf@eui.eu


    General information on local transport

    From Florence airport:

    Florence airport is located 8 km from the city centre, approximately 30 minutes by taxi or bus. Taxis can be found outside the arrivals terminal; no reservation is needed. A taxi ride from the airport costs about €20 and takes approximately 25/30 minutes.

    A tramway (line T2) connects the airport to the city centre. Trains leave from the airport terminal and take 20 minutes to the main railway station. One-way tickets can be bought from vending machines for €1.50.

    The airport is also connected to the main railway station in Florence by a shuttle bus (‘Vola in bus’) that leaves every 30 minutes (on the hour and on the half-hour) and takes 25 minutes. Tickets are available on board for €6.00.

    From the central railway station:

    Take bus n. 7 at the bus stop Stazione Nazionale in the direction “Fiesole Piazza Mino”, get off at the stop ‘San Domenico 01’. For bus routes and timetables consult the official timetable.

    Bus tickets are sold outside the railway station, at ATAF ticket kiosks and vending machines, tobacconists (tabacchi), newspaper kiosks (edicole), and most cafes (bar). They must be bought before boarding and stamped using the machine on the bus. A ticket costs €1.50 and it is valid for 90 minutes. Bus tickets can be purchased also on board (€ 2.50), but the driver is not obliged to give change.

    Private car

    From the A1 Milano-Napoli (Autostrada del Sole), take the Firenze Sud exit and follow directions to the city centre/Stadio. Follow the directions to the stadium (Stadio), then for Fiesole. San Domenico is on the main road to Fiesole.

    The EUI has several free parking areas available all over the Campus.

  • Course material

    Registered participants can access the course material using the password provided by the FBF secretariat.