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Dissertations / Theses on the topic 'Market microstructure'
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Stork, Christopher Oliver. "Microstructure of option markets without market makers." Thesis, London Metropolitan University, 2000. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.343195.
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Tse, Jonathan. "Market microstructure modelling." Thesis, University of Oxford, 2010. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.540272.
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Hoffmann, Peter. "Essays in Market Microstructure." Doctoral thesis, Universitat Pompeu Fabra, 2011. http://hdl.handle.net/10803/38703.
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This thesis covers three topics in Market Microstructure. Chapter 1 demonstrates that market access frictions may play a significant role in the competition between trading platforms. Analyzing a recent dataset of the trading activity in French and German stocks, we provide evidence that the incumbent markets dominate because the sole market entrant exposes liquidity providers to an excessive adverse selection risk due to a lack of noise traders. Chapter 2 presents a theoretical model of price formation in a dynamic limit order market with slow human traders and fast algorithmic traders. We show that in most cases, algorithmic trading has a detrimental effect on human traders’ welfare. Finally, Chapter 3 empirically analyzes the role of pre-trade transparency in call auctions. Comparing the trading mechanisms in place on the French and German stock exchanges, we find that transparency is associated with higher trading volume, greater liquidity, and better price discovery.Esta tesis estudia tres temas diferentes de la microestructura de los mercados financieros. El capítulo 1 demuestra que fricciones en el acceso al mercado pueden desempeñar un papel significativo en la competencia entre plataformas de negociación de activos. El análisis de un conjunto de datos recientes de la actividad en acciones francesas y alemanas demuestra que los mercados primarios dominan debido a que el único mercado satélite expone los proveedores de liquidez a un riesgo excesivo de selección adversa, causado por una falta de noise traders. El capítulo 2 presenta un modelo teórico de formación de precios en un mercado dinámico con limit order book poblado por agentes humanos lentos y agentes algorítmicos rápidos. Se demuestra que, en la mayoría de los casos, la negociación algorítmica tiene un efecto negativo sobre el bienestar de agentes humanos. Por último, el capítulo 3 analiza empíricamente el papel de la transparencia pre-negociación en las subastas de apertura y de cierre. Comparando los mecanismos en las bolsas francesas y alemanas, encontramos que la transparencia está asociada con un volumen mayor, una liquidez mayor y un mejor price discovery.
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Lew, Sean. "Essays on market microstructure." Thesis, London School of Economics and Political Science (University of London), 2012. http://etheses.lse.ac.uk/703/.
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This thesis contains three essays on market microstructure. Chapter 1 studies how endogenous information acquisition affects financial markets by modelling potentially informed traders who optimally acquire variable information at increasing cost. Prices affect the informed trading by providing incentives for acquiring information. Endogenous information acquisition explains the stylised facts that informed trading and transaction volume spike after informational events and fall over time. My model also tells a cautionary tale for interpreting measures of informed trading. Three common empirical proxies derived under the exogenous assumption (spreads, Easley O'Hara's PIN and blockholder interest) do not agree with each other in my setup. Chapter 2 develops a more general framework with endogenous information acquisition which I use to examine the behaviour of an optimal monopolistic market maker. Unlike a competitive market maker, he sets prices to increase information revelation which is valuable to him. I characterise market information structure by whether narrower or wider spreads increase the information revealed by trades. An optimal monopolistic market maker may behave differently from the standard exogenous information benchmark. He may set narrower spreads in early periods. On average, spreads may widen over time. The different results arise from the interaction of a monopolistic market maker with endogenous information acquisition. Chapter 3 studies the impact of confidential treatment requests made by institutional investors to the Securities and Exchange Commission (SEC) to delay disclosure of their holdings. The SEC requires the manager to present a coherent on-going trading program in his request for confidential treatment. If granted, he is restricted to trade in a manner consistent with his reported forecast in the subsequent period. Under the restriction, the manager earns higher expected profits by applying for confidential treatment only if his probability of success exceeds a threshold. The model predicts that the price impact of a disclosed trade due to a confidential treatment request denial is greater than that of a disclosed trade where there is no request.
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Lin, Hao. "Essays in market microstructure." Thesis, University of Warwick, 2006. http://wrap.warwick.ac.uk/4421/.
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Market making is central to the study of market microstructure. Market makers stand ready to provide liquidity, market stability and price discovery, issues of great importance to regulators, practitioners and academics. This thesis contributes to the literature by studying four topical issues related to market making. The thesis consists of four essays. In the first essay we develop a simple multi-period model of market making for a monopolistic stock market maker. The market maker tries to solve simultaneously the problems of managing his inventory and trading with informed traders. He uses a Kalman filter to update his estimates of the unknown market prices through his noisy order flow observation. We analytically characterize the optimal bid and ask prices and find that they depend on the beginning inventory, the estimated price, and the market maker's prior estimation error of the price process for each time period. We obtain desirable numerical results by using properly chosen parameters. The extensions to the continuous time and a competitive market making environment are also discussed. The second essay extends the model in the first essay to consider the market making of multiple stocks. The market maker still does not know the true prices but is assumed to know the return covariance structure of these stocks. When the market maker considers the correlated order flow information, his knowledge of the return covariance improves his estimation of the unknown price processes, resulting in higher cumulative profits and lower risks of the profits. The third essay analyzes the effect of option market makers' hedging on the informed trading strategy and the subsequent changes in the costs of liquidity provision in both stock and option markets. In a sequential trading framework, an option market maker uses the stock market to hedge his option position. His hedging trade affects the way that informed traders submit their orders in both the stock and the option market, which in turn changes the informed trading pressure faced by the market makers in each market. Furthermore, information in the option trading is passed to the stock market through the hedging trade. Both stock and option spreads are wider with option market maker's hedging. The increase in the spreads is more significant when the option market maker hedges in the underlying market than when it hedges with different options. The fourth essay provides a model of bookmaking in a horse race betting market. The bookmaker observes the noisy public betting flow and faces the risk of trading with possible informed traders, as well as the risk of his unbalanced liability exposures. Even the noisy demand can unbalance the bookmaker's book. In our model, the bookmaker revises his odds to mitigate the risk. Allowing the bookmaker to set odds over several rounds of betting gives a clear view of the bookmaker's price setting strategy and its impact on the public betting flow over time. The study of horse race bookmaking provides useful insights into the market making of state contingent claims such as options.
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Saporta, Victoria. "Essays on market microstructure." Thesis, University of Cambridge, 1997. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.311019.
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Eikeboom, Arnout M. (Arnout Michiel). "Essays in market microstructure." Thesis, Massachusetts Institute of Technology, 1993. http://hdl.handle.net/1721.1/12232.
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Palazzo, Francesco. "Essays in market microstructure." Thesis, London School of Economics and Political Science (University of London), 2015. http://etheses.lse.ac.uk/3134/.
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This dissertation contains three theoretical essays on the functioning and the organization of over the counter markets. The first paper, "Is Time Enough to Alleviate Adverse Selection?," considers a dynamic adverse selection model in which sellers pay a search cost to find a new buyer. I uncover a relationship between adverse selection and the magnitude of search costs. Interestingly, small search costs may increase the severity of the adverse selection problem, ultimately leading to a lemons market. A market design intervention may mitigate adverse selection and promote full market participation. Conditional upon an adequate level of information disclosure, a per period market participation tax, coupled with a final rebate once a seller trades, introduces a credible signalling device. The second paper, "Peer Monitoring Incentives via Central Clearing Counterparties," studies how the novel introduction of mandatory clearing for over the counter financial assets may affect dealers’ incentives to monitor each other’s. The design of the loss allocation rules is crucial. To maximize peer monitoring incentives, a higher share of losses should be payed by surviving members with a greater trade exposure to the defaulting dealer. In practice, this mechanism can be implemented through variation margin haircutting. If all members should contribute, equilibrium outcomes may be inferior to what can be achieved without clearing. The third paper, "Learning and Price Dynamics in Durable Goods Markets," is joint work with Min Zhang. We set up a dynamic model with two key features: first, agents enjoy heterogeneous use values, and later resell the good; second, prices do not incorporate all available information. Informational frictions slow down learning, and affect price movements asymmetrically in high and low aggregate demand states. Learning and the resale motive are the predominant force for durable goods with short resale horizons, slow time-varying aggregate demand, and similar use values among buyers.
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Yin, Hao. "Essays on market microstructure." [Bloomington, Ind.] : Indiana University, 2008. http://gateway.proquest.com/openurl?url_ver=Z39.88-2004&rft_val_fmt=info:ofi/fmt:kev:mtx:dissertation&res_dat=xri:pqdiss&rft_dat=xri:pqdiss:3319894.
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Thesis (Ph.D.)--Indiana University, Dept. of Economics, 2008.Title from PDF t.p. (viewed on May 11, 2009). Source: Dissertation Abstracts International, Volume: 69-08, Section: A, page: 3258. Advisers: Craig Holden; Konstantin Tyurin.
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Wang, Qin. "Essays in Market Microstructure." Diss., The University of Arizona, 2009. http://hdl.handle.net/10150/195100.
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The first essay investigates whether there is an informational linkage between option trading activities and underlying stock depths. I find that option trading activities and underlying stock depths are informative for predicting each other, indicating that a linkage does exist. I further find that underlying stock depths beyond best prices contain more information than same-side depths at best prices for predicting future option trading activities, which is corroborated by my additional finding that institutional investors are more likely to place underlying stock limit orders less aggressively than individual investors. My findings indicate that standing underlying stock limit orders play an important role in price discovery between options and underlying stock markets.The second essay empirically examines whether specialists face adverse selection and evaluates the performance of the six measures of adverse selection or trade informativeness. I find that specialists face adverse selection. I find that the Glosten-Harris (1988) measure is the most reliable, that the Huang-Stoll (1997) measure is the least reliable, and that the ranking among the George-Kaul-Nimalendran (1991), Lin-Sanger-Booth (1995), PIN (1996), and Hasbrouck (1991b) measures is ambiguous.
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Cheung, Ming-yan William. "Market microstructure of an order driven market." Click to view the E-thesis via HKUTO, 2005. http://sunzi.lib.hku.hk/hkuto/record/B3203782X.
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Cheung, Ming-yan William, and 張明恩. "Market microstructure of an order driven market." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2005. http://hub.hku.hk/bib/B3203782X.
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Davies, Ryan. "Topics in financial market microstructure." Thesis, National Library of Canada = Bibliothèque nationale du Canada, 2001. http://www.collectionscanada.ca/obj/s4/f2/dsk3/ftp05/NQ63416.pdf.
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Papavassiliou, Vassilios. "Essays on equity market microstructure." Thesis, Queen's University Belfast, 2010. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.527887.
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Banti, Chiara. "Essays in FX market microstructure." Thesis, City University London, 2013. http://openaccess.city.ac.uk/2956/.
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The thesis presents three papers in the field of international finance and provides a study of the foreign exchange (FX) market from a microstructure perspective. From the empirical identification of a common component in liquidity across currencies, referred to as FX market liquidity, the thesis investigates its asset pricing implications, determinants and cross-market dynamics. The first paper is an empirical study of global liquidity risk in the FX market. Estimating liquidity with the Pastor-Stambaugh measure originally developed for the stock market, the paper documents strong liquidity commonality across currencies. Given this observation, it estimates a measure of global FX liquidity risk and shows that the risk is priced in the cross-section of currency returns. It finally evaluates the associated risk premium at around 4.7 percent per annum. The second paper provides an empirical analysis of the determinants of the time variation in FX market liquidity documented in the first paper. Employing two measures of liquidity, transaction costs and the Pastor-Stambaugh measure from the first paper, the study finds a significant role of traditional determinants, such as global volatility, market returns and seasonality, and of funding liquidity constraints to explain both aspects of market liquidity. Finally, the third paper is an empirical investigation of illiquidity linkages across the FX and US stock markets. Focusing on transaction costs, the paper finds strong evidence of co-movement, especially during the recent financial crisis. In this respect, illiquidity contagion across the two markets is documented. Given dealers' role as liquidity providers in both markets, their trading behaviour may have significant implications for cross-market liquidity dynamics. Indeed, focusing on the potential sources of the observed cross-market linkages, transaction costs are found to be strongly related to the liquidity supplied to the financial system.
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Long, Hannah Jade. "Empirical studies of market microstructure." Thesis, University of Bristol, 2017. https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.738537.
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Schneider, Michael Thomas. "Market microstructure, price impact and liquidity in fixed income markets." Doctoral thesis, Scuola Normale Superiore, 2018. http://hdl.handle.net/11384/85739.
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Aristidou, Antonis. "Market microstructure issues related to the Greek capital market." Thesis, City University London, 2007. http://openaccess.city.ac.uk/8515/.
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Since the stock market crash of October 1987, academics and policy makers have been very concerned about the causes of the crash and whether the microstructure of the equity market should be redesigned to protect the market from drastic fluctuations. For their concerns, circuit breakers have been recommended as the mechanisms for the market stabilisation and for reducing the volatility of the stock market. Empirical and theoretical studies carried out so far have not been able to conclusively resolve the debate on the effects of circuit breakers on financial markets. As a result, this thesis aims to contribute to the market microstructure literature and to add empirical content to current academic and policy discussions, by conducting an investigation on the effects and implications of circuit breakers on financial markets, focusing on daily price limits, transaction taxes and margin requirements, with specific reference to the Greek capital market. Based on our empirical findings, we provide little evidence in support of the effectiveness of the above regulatory measures, in line with previous literature. Furthermore, our empirical findings suggest that both researchers and policy makers. should continue their efforts to conduct further tests on their suitability, as well as in exploring other mechanisms and channels, which might be more effective in stabilising the market and reducing volatility. Finally, the empirical findings in this thesis support what Roll (1989) stated over 17 years ago in his comprehensive review on the implications for regulatory policy. that there is little evidence in favour of the efficacy of margin requirements, price limits and transaction taxes.
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Creswell, Philip N. "Market microstructure : the automated order book." Thesis, University of Edinburgh, 2004. http://hdl.handle.net/1842/24500.
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This thesis examines the efficiency and implications of the market microstructure provided by the London Stock Exchange (LSE), extending the framework of O’Hara (1995), Parlour (1998) and Madhavan (2000) to accommodate the idiosyncrasies of the Stock Exchange Trading System (SETS) and the Stock Exchange Automated Quotation System (SEAQ). First, we offer a comparison of the two trading platforms using the methodology of Haung and Stoll (1996) and Venkataraman (2001) to show that the SETS order book is a more efficient platform, although it has a limited ability to cope with large orders. We compare the results with those from other exchanges described in Biais et al (1995) and De Jong et al (1995). We then give a detailed analysis of the SETS order book, the aggregate behaviour of traders, and a look at an investor’s order choice between aggressive market orders and passive limit orders. Building on theories described in Glosten (1992), Keim and Madhavan (1995), Harris and Hasbrouk (1996), Griffiths et al (2000) and Grinblatt and Keloharju (2001) we ask such questions as, when and in what way does the spread and depth vary? How do market conditions affect the choice of orders and vice versa? And how do the official order book market and the unofficial dealer market coexist? We analyse the aggressiveness of orders sent to SETS, as Beber and Caglio (2003) and Ellul et al (2003) do for the NYSE, and explain how spread, depth and asymmetry of depth affect the choice between limit orders and market orders. We find that, as the market moves from a bull phase to a bear phase, overall order activity ‘increases, the proportion of trading going through the order book increases, the quoted spread seems unaffected but the asymmetry of depth increases. We also find that daytime returns are higher during the bear market, due to the speculative nature of the continuous market (compared to the actions of the off market traders and the price set during the opening call auction). We differentiate between the behaviour of sellers and buyers; buyers are more heterogenous, and their decisions are more reliant on the time of day and market conditions. Finally we differentiate investors by trading volume and show that while medium sized traders conform to modern theory, larger traders use aggressive orders to manipulate the market and hide information, and small traders pay little attention to the method of execution.
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Kyriacou, Myria. "Foreign exchange market microstructure and forecasting." Thesis, City University London, 2009. http://openaccess.city.ac.uk/8717/.
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Using two unique datasets, one at a daily frequency including six currency pairs, and another tick-by-tick dataset in €/US$, we investigate some of the unanswered questions in the field of foreign exchange market microstructure. We confirm the contemporaneous relationship between flows and exchange rates found in the literature in the daily data, but in the forecasting experiments we find no forecasting power, regardless of model, history used forecast horizon or currency pair. The forecasting performance is not improved by considering a system of exchange rates, or by evaluating based on directional ability instead of the more usual RMSE ratio. Subsequently we estimate two standard market microstructure models - Madhavan-Smidt and Huang-Stoll - using the high-frequency dataset in order to gain an insight into the information content of customer order flow. While we are unable to find any evidence of information content from financial customer trades, we find strong evidence that large corporate customer trades are perceived to have statistically and economically significant information content. Lastly we turn our attention to the issue of causality. Using a distributed lag model to investigate the impact of flows on exchange rates and vice versa, corporate orders are found to have a small long-term impact, but more significantly we find evidence of positive feedback trading in both corporate and financial customers. We explore the long-run dynamics of the system using a VECM, and find that all counterparty types have a positive equilibrium relationship with the exchange rate. Crucially, the adjustment dynamics show that all of the weight of adjustment to restore equilibrium after a shock falls to flows. Lastly, we conduct a high frequency forecasting experiment, but again find no evidence of forecasting power. Two important themes emerge from the high-frequency investigation. The first is the apparent importance of corporate customers, and the second is that the direction of causality runs not from flows to exchange rates, but from exchange rates to flows. We conclude that the weight of the evidence suggests that feedback rather than information content is what drives the strong contemporaneous relationship between exchange rates and flows.
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Panizzo, Jose Manuel Carrera. "Market microstructure of the foreign exchange market : lessons from Mexico." Thesis, Lancaster University, 1998. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.302418.
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Zebedee, Allan A. "The flow of information in financial markets : a market microstructure examination /." Diss., Connect to a 24 p. preview or request complete full text in PDF format. Access restricted to UC campuses, 2001. http://wwwlib.umi.com/cr/ucsd/fullcit?p3026388.
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Voigt, Christian [Verfasser]. "Selected Essays on Market Microstructure / Christian Voigt." München : GRIN Verlag, 2008. http://d-nb.info/1189316668/34.
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Cai, Xiaowu. "Market microstructure of the London Stock Exchange." Thesis, University of Leeds, 2004. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.403044.
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HECK, SYLVIO KLEIN TROMPOWSKY. "ESSAYS IN CURRENCY RISK AND MARKET MICROSTRUCTURE." PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO, 2008. http://www.maxwell.vrac.puc-rio.br/Busca_etds.php?strSecao=resultado&nrSeq=13054@1.
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CONSELHO NACIONAL DE DESENVOLVIMENTO CIENTÍFICO E TECNOLÓGICOEsta tese de doutorado compõe-se de três artigos, sendo dois em finanças empíricas e um em microestrutura de mercado. O primeiro artigo estuda de que forma movimentos nas curvas de juros futuros em Reais e Dólares Americanos negociados na BM&F estariam relacionados com duas medidas de prêmio de risco cambial, uma à priori, calculada com base nas expectativas de variação cambial três meses à frente apuradas pelo Focus-BC, e outra à posteriori, calculada sobre a variação cambial efetiva realizada nos mesmos três meses. Os resultados mostram que movimentos da curva de DI parecem mais correlacionados com a variação cambial efetiva do que com as expectativas coletadas entre os agentes. O segundo artigo é uma variação do modelo de Ang e Piazzesi (2003), e investiga a contribuição do mercado de câmbio sobre o prêmio a termo na curva de juros futuros em Reais no Brasil. Usa-se uma UIP no lugar de uma Regra de Taylor para modelar a dinâmica da taxa de curto prazo, o que nos permite substituir as variáveis macro usuais de inflação e produto pela expectativa de variação cambial e prêmio de risco cambial na especificação do prêmio a termo na curva. O terceiro artigo propõe um modelo de mercado interdealer em três estágios onde o processo de revelação de informação é modelado como um sinal ruidoso e invertido de forma seqüencial nos dois estágios de negociação no mercado inter-dealer que se seguem à transação inicial. As simulações realizadas sugerem que a diversificação de risco na economia diminui quanto maior a precisão do sinal nos dois estágios.
In this thesis we discuss two empirical essays in finance and one in market microstructure. The first article studies the joint dynamics of the two most liquid term structure of interest rates traded at BM&F, one in Brazilian reais and the other in US dollars, and two currency risk premia measures. One currency risk premia measure is obtained using currency expectation surveys conducted by the Central Bank of Brazil, while the other will be residual from the three month forward premium traded each day and the effective currency observed on the liquidation date three months after. Results show that the term structures will explain some of the realized currency risk premia observed three months after. We see this as an evidence in favor of information in the curves more correlated to the effective currency movement in three months than the expected devaluation. The second article proposes and extension of the framework introduced by Ang and Piazzesi (2003) to accommodate a no- arbitrage term structure model with macro factors. We replace the usual inflation and output macro factors for two currency variables, the expected currency devaluation and the currency risk premia. Results here show a better fit when compared to existing models estimated for Brazil. The third article proposes an inter-dealer market model in three stages, where disclosure of information is modeled by noisy informative signals. Simulations show that dealers better informed will play strategically to avoid revealing information and the risk-sharing in the economy will be lower when we increase the precision of the informative signals.
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Zhang, Hanyu. "Essays on intraday volatility and market microstructure." Thesis, University of Reading, 2017. http://centaur.reading.ac.uk/72225/.
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This work makes three main contributions to the financial econometrics literature. In Chapter 3, we study the intraday volatility of European government bonds under the framework of the multiplicative component GARCH model (Engle and Sokalska, 2012). We suggest a flexible and effective procedure for jointly filtering mid-quote prices and estimating volatility models and show that intraday data contain relevant information for daily volatility forecasts. In Chapter 4, we show that a bond portfolio can reduce its intraday variance risk by including bonds from Italy and Spain. Furthermore, we demonstrate that the bivariate (scalar) DCC model is capable of computing an accurate VaR, providing correct conditional and unconditional coverage at lower than 1% (inclusive) confidence level and inducing lower losses. In Chapter 5, we demonstrate that liquidity measures, such as the bid-ask spread and quantity available for trading at the best quotes, improve across maturities and countries after EuroMTS has allowed every market participant to post limit orders and not just designated market makers. In particular, we show that the relative bid-ask spread for trading 10 million bonds decreases with the rule change. The proportion of time when the relative bid-ask spread stays low also increases. The results suggest that greater competition amongst liquidity providers improves liquidity.
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Leika, Mindaugas. "System dynamics, market microstructure and asset pricing." Thesis, Massachusetts Institute of Technology, 2013. http://hdl.handle.net/1721.1/81065.
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Thesis (M.B.A.)--Massachusetts Institute of Technology, Sloan School of Management, 2013.Cataloged from PDF version of thesis.
Includes bibliographical references (p. 57-59).
Traditional asset pricing approaches are not able to explain extreme volatility and tail events that characterized financial markets in the past decade. System Dynamics theory, which is still underutilized in financial modeling, could help researchers to model stock market dynamics, explain and simulate extreme events. This paper proposes an artificial stock market model, which can be used to simulate stock market behavior, incorporate various assumptions about interactions among market participants: fundamental, noise and technical traders. The model includes multiple feedback loops, namely, positive feedback, ratings, debt and leverage. Dynamic interactions among loops stabilize markets and limit bubble formation. Model simulation results show, that not only the numerical limit of leverage, but also regulatory definition of leverage matters. Market stability can be achieved faster with lower system-wide and narrow definition of leverage. To increase stability, Central banks and regulators might consider targeting leverage in a financial system.
by Mindaugas Leika.
M.B.A.
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Ibikunle, G. "Financial market microstructure of EU emissions futures." Thesis, University of East Anglia, 2012. https://ueaeprints.uea.ac.uk/39452/.
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Contreras, Eitner Alfredo. "Essays in Rational Inattention and Market Microstructure." Doctoral thesis, Universitat Autònoma de Barcelona, 2021. http://hdl.handle.net/10803/673962.
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En la meva dissertació, dono una explicació a diferents anomalies de preus dels actius en el mercat financer a l'caracteritzar els conjunts d'informació dels que interactuen en ell mateix. En particular, estudi dels efectes d'enfrontar una restricció en el volum d'informació que un actor pot processar. Per a això, desenvolupament una anàlisi des d'una perspectiva de la microestructura de mercat financer, on un grup d'inversors té accés a informació privilegiada sobre els actius negociats. Trobo que aquestes anomalies poden originar quan un agent racional enfronta una restricció en el volum d'informació que pot processar. La dissertació conté resultats quan els inversors i els agents de fixació de preus s'enfronten aquesta restricció.En mi disertación, doy una explicación a diferentes anomalías de precios de los activos en el mercado financiero al caracterizar los conjuntos de información de quienes interactúan en él mismo. En particular, estudio los efectos de enfrentar una restricción en el volumen de información que un actor puede procesar. Para ello, desarrollo un análisis desde una perspectiva de la microestructura del mercado financiero, donde un grupo de inversores tiene acceso a información privilegiada sobre los activos negociados. Encuentro que estas anomalías pueden originarse cuando un agente racional enfrenta una restricción en el volumen de información que puede procesar. La disertación contiene resultados cuando los inversores y los agentes de fijación de precios enfrentan esta restricción.
In my dissertation, I explain different asset price anomalies in the financial market by characterizing the information sets of those who interact within it. In particular, I study the effects of facing a restriction on the volume of information that an actor can process. For this purpose, I construct the analysis from a financial market microstructure perspective, where a group of investors has access to inside information about the traded assets. I find that these anomalies can originate when a rational agent faces a constraint on the information volume they can process. The dissertation contains results when investors and price-setting agents face this restriction.
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Nie, Jing. "Three essays on the empirical market microstructure of money market derivatives." Thesis, Durham University, 2016. http://etheses.dur.ac.uk/11614/.
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This thesis is the first directly to study the entire limit order book of a large market. Herein, I conduct a population study on the microstructure of the Eurodollar future market, to my knowledge this is a) the first study of its type and b) the largest microstructure study ever conducted. I will build a data-drive model that incorporates information from the entire population of quotes updates and transactions on this type of future market. This thesis aims to provide a comprehensive understanding of the market microstructure on money market derivatives and the impact of high-speed algorithmic trading activity on the market characteristics and quality. I apply a broad battery of market volatility and liquidity measurements, and gauge the proportion of high-frequency algorithmic traders in the market. This thesis provides a standard asymmetric information based theoretical model to predict the relation on the term structure of Eurodollar future contracts. The prediction is a non-linear relation between the saturation of algorithmic traders (ATs) versus the impacts on the quality of the market. Therefore, I develop a novel semi-parametric estimator and model the non-linear relation between the impact of the fraction of algorithmic trading and a large set of different market quality indicators including volatility, liquidity and price informativeness. Finally, I consider the efficiency and the speed of high-frequency prices formation by implementing the return autocorrelations and vector autoregression, and also make a contribution to the trade classification algorithm using the order book data. My findings are fourfold. First, the impact of high-frequency trading (HFT) on market quality is a non-linear by implementing the semi-parametric model. This may partially explain why prior studies have found contradictory results regarding the impact of high-frequency traders (HFTs) on market characteristics. Second, prior studies only including the inside quotes or best bid best ask are limited to reflect all the information in the market. My findings suggest that the second level quoting in the limit order book is by far the most rapidly quoted element of the order book. Furthermore, I find that wavelet variance covariance of the bid and the ask side changes substantially over the term structure; providing further supporting evidence of the non-linear impact of HFTs. Finally, the adjustment time of the trade prices formation process is within one second, and the quote prices are even faster within 200 milliseconds (ms). The mid-quoted return autocorrelation is positive and gradually increase from the shortest time interval to the longest time interval. The trade prices are less sensitive to new information as the contract approaches its maturity.
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Phetcharakupt, Veeraphat. "Essays on market microstructure : empirical studies on the Thai stock market." Thesis, University of Essex, 2008. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.486569.
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In this thesis, there are three essays on empirical market microstructure. The fIrst essay extends the study of the stealth trading hypothesis of Barclay and Warner (1993) that informed traders submit average size trades in order to minimize the price impact of their trades. After distinguishing between three types ofprice impact classifIed by source, I fInd that informed traders are more inclined to submit medium-size limit orders in order to take advantage from incoming small-size market orders of uninformed traders. Therefore, the fmdings are consistent with tl}e stealth trading hypothesis.In the second essay, I look at order submission strategies around earnings announcements. I fInd that the execution risk is the main factor determining traders' choice of order type during both the normal trading periods and periods of high likely information asymmetry . such as earning announcement periods. Traders' order submission strategies depend largely on the state of the limit order book at the time the order is submitted (Le. the depth at the same side, the depth at the opposite side, and the bid-ask spread). There is no strong evidence of a switch of certain order types between the normal trading periods and the earnings announcement periods.
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Al-Suhaibani, Mohammad. "Three essays on the market microstructure of the Saudi stock market." Thesis, National Library of Canada = Bibliothèque nationale du Canada, 1998. http://www.collectionscanada.ca/obj/s4/f2/dsk1/tape10/PQDD_0004/NQ39618.pdf.
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Peng, Ke. "Essays on the market microstructure of London fixed income securities market." Thesis, University of Strathclyde, 2006. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.426357.
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Aidov, Alexandre. "Three Essays on Market Depth in Futures Markets." FIU Digital Commons, 2013. http://digitalcommons.fiu.edu/etd/974.
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Liquidity is an important market characteristic for participants in every financial market. One of the three components of liquidity is market depth. Prior literature lacks a comprehensive analysis of depth in U.S. futures markets due to past limitations on the availability of data. However, recent innovations in data collection and dissemination provide new opportunities to investigate the depth dimension of liquidity.
In this dissertation, the Chicago Mercantile Exchange (CME) Group proprietary database on depth is employed to study the dynamics of depth in the U.S. futures markets. This database allows for the analysis of depth along the entire limit order book rather than just at the first level.
The first essay examines the characteristics of depth within the context of the five-deep limit order book. Results show that a large amount of depth is present in the book beyond the best level. Furthermore, the findings show that the characteristics of five-deep depth between day and night trading vary and that depth is unequal across levels within the limit order book. The second essay examines the link between the five-deep market depth and the bid-ask spread. The results suggest an inverse relation between the spread and the depth after adjusting for control factors. The third essay explores transitory volatility in relation to depth in the limit order book. Evidence supports the relation between an increase in volatility and a subsequent decrease in market depth. Overall, the results of this dissertation are consistent with limit order traders actively managing depth along the limit order book in electronic U.S. futures markets.
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FERNANDES, ANDRE VENTURA. "MICROSTRUCTURE OF BRAZILIAN FX MARKET: COMPARISON OF THE SPOT AND FUTURES MARKETS." PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO, 2008. http://www.maxwell.vrac.puc-rio.br/Busca_etds.php?strSecao=resultado&nrSeq=11912@1.
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COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIORFUNDAÇÃO DE APOIO À PESQUISA DO ESTADO DO RIO DE JANEIRO
O objetivo deste trabalho é comparar o mercado à vista e futuro de câmbio no Brasil, buscando identificar em qual dos mercados se dá a formação da taxa de câmbio. Analisa-se o funcionamento do mercado cambial no seu nível micro, isto é, nas suas instituições e nas assimetrias dos seus participantes, através da abordagem da microestrutura. Utiliza-se uma base de dados que contém 100% das propostas de compra, venda e dos negócios fechados dos pregões de dólar futuro e do mercado interbancário de dólar à vista entre 01/02/2006 a 31/05/2007. Mostra-se que o mercado de dólar futuro é muito mais líquido do que o mercado à vista no Brasil. Ademais, demonstra-se que a cotação da taxa de câmbio se forma primeiro no mercado futuro, sendo então transmitida por arbitragem para o mercado à vista. Por fim, utiliza-se a abordagem da microestrutura para realizar previsões intradiárias para a taxa de câmbio, obtendo resultados superiores às demais abordagens usualmente testadas na literatura, como a Paridade Descoberta da Taxa de Juros e o passeio aleatório.
This paper compares the spot and futures FX markets in Brazil, trying to identify which one leads the price determination. FX markets are analyzed at the micro level, at the level of its institutions and the asymmetries of its players, through the microstructure approach. A database that contains 100% of the bids, asks and deals of the dollar futures and interbank spot markets from 02/01/2006 to 05/31/2007 is used. It is shown that the futures market is much more liquid than the spot market in Brazil. Moreover, it is shown that the quote is determined firstly in the futures market, being transmitted through arbitrage to the spot market. The microstructure approach is also used to make intraday forecasts to the FX rate with superior results to the other approaches usually tested in the literature, like the Uncovered Interest Rate Parity and the Random Walk.
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Vo, Minh Tue 1965. "Insider trading, asymmetric information, and market liquidity : three essays on market microstructure." Thesis, McGill University, 2002. http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=38528.
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This thesis comprises three essays on market microstructure, focusing on the issues of insider trading, asymmetric information and market liquidity. The first essay examines the effects of the mandatory disclosure regulations on the trading behavior of informed traders. Specifically, we compare the (perfect Bayesian) equilibrium when disclosure is mandatory to the equilibrium when insiders do not have to disclose their trades. We show that under mandatory disclosure the market becomes more efficient and more liquid, making the uninformed traders unambiguously better off. We also show that in order to conceal part of his information, under mandatory disclosure the insider may trade against his information, and, at the same time, add a random---"noise"---component to his trade order. As a result, insiders may end up buying (selling) when his information indicates the asset is overvalued (undervalued). This provides a rationale for contrarian trading.The second essay examines trading behavior, price behavior and the informational efficiency and the informativeness of the price process in the equilibrium of a strategic trading game when some investors receive information before others. We show that the early informed investor may trade against his information to maintain his information superiority over the market. Under some conditions, subsequent price changes are positively correlated. We also find that the price process is less efficient and less informative than would be the case where there is no late-informed trader.
The third essay analyzes the infra-day behavior of market liquidity of the Toronto Stock Exchange which uses a computerized limit-order trading system. Along with previous studies, we show that the U-shaped infra-day pattern of spread does not depend on the market architecture. In addition, we confirm that bid-ask spread and market depth are two dimensions of market liquidity. Liquidity providers use both dimensions to deal with adverse selection problems. We also examine how price volatility and trading volume affect market liquidity. Price volatility is inversely related to market liquidity but trading volume is directly related to liquidity. High trading volume implies high liquidity trades and as a result, liquidity providers decrease (increase) ask (bid) price and/or increase depth at each quote.
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Marcus, Elwin. "Simulating market maker behaviour using Deep Reinforcement Learning to understand market microstructure." Thesis, KTH, Skolan för elektroteknik och datavetenskap (EECS), 2018. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-240682.
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Market microstructure studies the process of exchanging assets underexplicit trading rules. With algorithmic trading and high-frequencytrading, modern financial markets have seen profound changes in marketmicrostructure in the last 5 to 10 years. As a result, previously establishedmethods in the field of market microstructure becomes oftenfaulty or insufficient. Machine learning and, in particular, reinforcementlearning has become more ubiquitous in both finance and otherfields today with applications in trading and optimal execution. This thesisuses reinforcement learning to understand market microstructureby simulating a stock market based on NASDAQ Nordics and trainingmarket maker agents on this stock market. Simulations are run on both a dealer market and a limit orderbook marketdifferentiating it from previous studies. Using DQN and PPO algorithmson these simulated environments, where stochastic optimal controltheory has been mainly used before. The market maker agents successfullyreproduce stylized facts in historical trade data from each simulation,such as mean reverting prices and absence of linear autocorrelationsin price changes as well as beating random policies employed on thesemarkets with a positive profit & loss of maximum 200%. Other tradingdynamics in real-world markets have also been exhibited via theagents interactions, mainly: bid-ask spread clustering, optimal inventorymanagement, declining spreads and independence of inventory and spreads, indicating that using reinforcement learning with PPO and DQN arerelevant choices when modelling market microstructure.Marknadens mikrostruktur studerar hur utbytet av finansiella tillgångar sker enligt explicita regler. Algoritmisk och högfrekvenshandel har förändrat moderna finansmarknaders strukturer under de senaste 5 till 10 åren. Detta har även påverkat pålitligheten hos tidigare använda metoder från exempelvis ekonometri för att studera marknadens mikrostruktur. Maskininlärning och Reinforcement Learning har blivit mer populära, med många olika användningsområden både inom finans och andra fält. Inom finansfältet har dessa typer av metoder använts främst inom handel och optimal exekvering av ordrar. I denna uppsats kombineras både Reinforcement Learning och marknadens mikrostruktur, för att simulera en aktiemarknad baserad på NASDAQ i Norden. Där tränas market maker - agenter via Reinforcement Learning med målet att förstå marknadens mikrostruktur som uppstår via agenternas interaktioner. I denna uppsats utvärderas och testas agenterna på en dealer – marknad tillsammans med en limit - orderbok. Vilket särskiljer denna studie tillsammans med de två algoritmerna DQN och PPO från tidigare studier. Främst har stokastisk optimering använts för liknande problem i tidigare studier. Agenterna lyckas framgångsrikt med att återskapa egenskaper hos finansiella tidsserier som återgång till medelvärdet och avsaknad av linjär autokorrelation. Agenterna lyckas också med att vinna över slumpmässiga strategier, med maximal vinst på 200%. Slutgiltigen lyckas även agenterna med att visa annan handelsdynamik som förväntas ske på en verklig marknad. Huvudsakligen: kluster av spreads, optimal hantering av aktielager och en minskning av spreads under simuleringarna. Detta visar att Reinforcement Learning med PPO eller DQN är relevanta val vid modellering av marknadens mikrostruktur.
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Ji, Shan Banking & Finance Australian School of Business UNSW. "Security market manipulations and the assurance of market integrity." Awarded by:University of New South Wales. Banking & Finance, 2009. http://handle.unsw.edu.au/1959.4/44724.
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This dissertation is motivated by two major factors. First, there have been no direct studies conducted for the relationship between market integrity and market efficiency and the driving forces behind the cross-sectional variations in market quality. Second, a better understanding the relationships among market integrity, market efficiency and other mechanism design factors for securities exchanges will facilitate securities exchanges achieve a satisfactory level of market quality. This dissertation consists of three chapters. In Chapter 1, a review of literature on market manipulation will be given. A series of common securities market manipulation strategies and corresponding market surveillance alerts will be explained and defined. In Chapter 2, we develop a testable hypothesis that market manipulation as proxied by the incidence of ramping alerts would raise transaction cost for completing larger trades. We find ramping alert incidence positively related to effective spreads in 8 of 10 turnover deciles from most liquid to thinnest-trading securities. The magnitude of the increase in effective spreads when ramping manipulation incidence doubles is economically significant, 30 to 40 basis points in many moderate liquidity deciles. This compares with an average effective spread of 72 basis points for index-listed securities in the most efficient electronic markets worldwide. In Chapter 3, In Chapter 3 of this thesis, we test the correlation between the levels of market integrity as proxied by the incidence of ramping alerts and a combination of proxies for factors from the following four potential drivers deciding the market quality across securities exchanges: ??? Securities Markets Trading Regulations ??? Securities Markets Technologies ??? Securities Market Infrastructure ??? Securities Market Participants The model we developed to test the correlation between the proxies for level of market integrity and seven proxies for the four potential drivers were estimated with Ordinary Least Square (OLS) and Two-stage Least Square (2SLS) error structures assumed, respectively to learn the most about the possible endogeneity of spreads and volatility. By performing Hausman-Wu specification tests, we concluded that simultaneity bias in the thickly-traded deciles is not material for the AI-Volatility and AI-Spread equation pairs. Subsequently, we used the PROBIT model to analyse the probability of adopting RTS across the 240 securities exchange deciles and the likelihood proves to be systematically related to four determinants in our sample. Finally we estimate the structural equations to investigate possible cross-equation correlation of the disturbances with either seemingly unrelated regression (SURL) estimation. Our findings are three-fold. Firstly, in the moderately-traded deciles, we find that the presence of a closing auction (CloseAucDum) reduces the incidence of ramping alerts. Trade-based manipulation proves more difficult when a manipulator???s counterparties can use closing auctions to unwind their intraday exposures. The RTS dummy variable is significantly positively related to alert incidence. In the absence of any panel data on the dynamic effects of adopting RTS, what we are observing in cross section is the perceived vulnerability of certain exchanges to manipulation and their consequent adoption of RTS plus the regulatory regimes required to have a salutary effect on market integrity. Second, in the moderately-traded deciles, we find that the closing auctions and more regulations in pursuit of market integrity lower quoted spreads. RTS and a regulation specifically prohibiting ramping indicate in cross-section the perceived likelihood of more ramping. Thirdly, in terms of the probability of the deployment of a real-time surveillance system, the estimations again differ by liquidity decile grouping. In the moderately-traded deciles, higher alert incidence, the presence of DMA, and higher FDI again increase the likelihood of adopting a real-time surveillance system. Our findings have a couple of policy implications for many securities exchanges in terms of market design and market surveillance. First, the exhibited relationship between alert incidence and effective spreads indicates trade-based manipulation has a significant impact on execution costs. Therefore, the prevention of securities market manipulation not only serves the indirect purpose of improving an exchange???s reputation for market integrity but also contributes directly to achieving a more efficient marketplace. Second, our results indicate that some market design changes can enhance the regulatory efforts to prevent securities market manipulations. For example, to prevent manipulators from marking the closing price, some exchanges could choose to adopt a closing auction or a random closing time, which would make manipulation more costly. Nevertheless, no securities exchange can be designed perfectly. Consequently, exchange and broker-level surveillance backed by effective regulatory enforcement is a necessary and pivotal complement to good design choices.
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Faciane, Kirby. "Empirical market microstructure of the FTSEurofirst index futures." Thesis, University of St Andrews, 2010. http://hdl.handle.net/10023/1975.
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This thesis is among the first market microstructure studies of an index futures market with designated market makers in the academic literature. The purpose of this thesis is to investigate intraday patterns of key variables, the relative size of the components of the quoted bid-ask spread, and the order decisions of uninformed traders, in a continuous dealer market for index futures with market makers. Overall, our findings aim to contribute to a better understanding of the roles of market makers and public customers in price formation. Intraday patterns of financial market variables such as trade price, volume, trade size, quoted spreads, depth, and volatility separately for designated market makers and public customers are examined. The lack of relevant and appropriate data in futures markets, as evidenced by Hasbrouck (2003) and Kurov (2005), has inhibited the growth of market microstructure in futures markets. Individual orders, quotes, trader identification, and transactions from June 2003 to December 2004, for FTSEurofirst 80 and 100 index futures are used in the study. Inclusion of the parties to order execution distinguishes this data set from most other futures microstructure sources. As this thesis is the first known academic study of the extant market microstructure of the FTSEurofirst index futures, the institutional aspects of the trading process for the FTSEurofirst index futures are also explored. An alternative method for estimating three cost components as a proportion of the bid-ask spread is developed. A framework is developed for the order decision process of an uninformed trader for the first time in a futures market with market makers. The results of this thesis may have implications for other financial markets and the field of market microstructure.
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Cai, Minnan. "The Chinese equity market : characteristics, microstructure and efficiency." Thesis, University of Leeds, 2005. http://etheses.whiterose.ac.uk/621/.
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The purpose of this research is to examine various issues about market efficiency and market microstructure in the Chinese equity market. Where. to date, there has been relatively little attention. Specifically. this thesis intends to answer the following questions. Is the Chinese equity market efficient? If not, has it been evolving towards efficiency over the years? What are the intraday patterns of price behaviour? Which trades move prices? Finally, does Chinese investors' psychology have effects on prices? In order to answer these questions four sets of empirical analysis have been undertaken. The first study investigates the evolution of China's stock market via analysing the ongoing predictive ability and profitability of simple, well known technical trading rules. The results suggest that while technical trading rules had short term predictive ability and profitability in the Chinese stock markets during the 1990's, this lessened as the markets evolved. The second research study documents the intraday variation in bid-ask spreads, trading volumes and volatility. The findings suggest that the existence of the intraday anomalies is not due to the peculiarities of the US markets. However, the shape of the intraday patterns in order-driven markets is different from those in quote-driven markets, which suggests a need for new theoretical models. The third area of work examines which trades move prices by testing three hypotheses: stealth trading, public information and price manipulation hypotheses. The results show that while medium and large-size trades are associated with disproportionately cumulative price changes, it is the large-size trades which have the largest effect on cumulative price increases. Aligned with the concerns noted by some eminent individuals in China, there seems to be price manipulation in China's stock market. The final research area studies the influence of Chinese cultural factors on price clustering and resistance. The results show a higher propensity of clustering on the digit 8 and lower propensity on digits 4 and 7, which is consistent with the preference for number 8 and the avoidance of numbers 4 and 7 in Chinese culture. The results suggest that investors' psychology does have effects on prices. This research hopes to help academics and practitioners understand better the market efficiency and the trading behaviour in the Chinese equity market. Especially, it has implications for policy makers and regulators who involve in the design of an efficiency market.
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Bielagk, Jana. "Essays on Market Microstructure and Pathwise Directional Derivatives." Doctoral thesis, Humboldt-Universität zu Berlin, 2018. http://dx.doi.org/10.18452/18817.
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Wir befassen uns mit Gleichgewichtsproblemen, die bei dem Zusammentreffen von Märkten und Marktteilnehmern entstehen, zuerst in einem Modell mit konkurrierenden Märkten mit Feedback und asymmetrischer Information und dann mit strategisch interagierenden Händlern. Zudem untersuchen wir spezielle Richtungsableitung im Kontext des pfadweisen Malliavinkalküls.
Im ersten Kapitel analysieren wir ein Prinzipal-Agenten-Problem mit einem monopolistischen Dealer, der mit einem Crossing-Netzwerk (CN) um den Handel mit Agenten mit privater Information konkurriert. Wir untersuchen die gewinnmaximierenden Angebote des Dealers für unterschiedliche Outside-Optionen und formulieren hinreichende Bedingungen für die Existenz und Eindeutigkeit einer optimalen Lösung. In unserem Modell ist die Einführung des CN für die Agenten vorteilhaft und ein Gleichgewichtspreis existiert.
Im zweiten Kapitel analysieren wir den Einfluss vergleichender Leistungsbewertung von Händlern auf die Preisfindung im Marktgleichgewicht. Ein Derivat soll einen markträumenden Preis bekommen unter Beachtung der strategisch handelnden Agenten. Das Risiko eines Händlers setzt sich aus dem eigenen Risikoprofil und dem Erfolg des Handelns relativ zum durchschnittlichen Handelserfolg aller zusammen und er wird durch eine BSDE gemessen. Wir bestimmen einen repräsentativen Agenten und zeigen so die Existenz und Eindeutigkeit eines Gleichgewichtspreises. Weiterhin können wir diesen charakterisieren und im Spezialfall von entropischen Risikomaßen konkret berechnen. In diesem Spezialfall führen wir auch eine Parameteranalyse durch.
Das dritte Kapitel verknüpft klassischen und pfadweisen Malliavinkalkül. Wir definieren und analysieren pfadweise Richtungsableitungen mit Hilfe von Perturbationen mit Cameron-Martin-Funktionen, mit (Hölder-)stetigen Funktionen, mit unstetigen Funktionen und mit Maßen. Somit sind sowohl die klassische Malliavin-Ableitung als auch Dupires vertikale Ableitung als Spezialfälle enthalten.We analyze equilibrium problems arising from interacting markets and market participants, first competing markets with feedback and asymmetric information, then strategically interacting traders; moreover we analyze a new notion of a pathwise directional derivative in the context of pathwise Malliavin calculus. The first chapter analyzes a principal-agent game in which a monopolistic profit-maximizing dealer competes with a crossing network (CN) for trading with privately informed agents. We analyze the structure of the dealer’s offered pricing schedules for different outside options. We give sufficient conditions for the existence and uniqueness of a solution to the dealer’s problem and show that in our setting the introduction of the CN is beneficial for the agents. Additionally, we discuss existence and uniqueness of an equilibrium price for the feedback between dealer and CN. In the second chapter we analyze the impact of performance concerns on a problem of equilibrium pricing. A derivative is priced such that the market clears, given strategically behaving agents. Their risk stems from a risky position in the future and the relative trading gains compared to all other agents. The risk measure of each agent is specified by a BSDE. In spite of the strategic interaction, we are able to apply a representative agent approach to obtain existence and uniqueness of the equilibrium market price of external risk. In the special case of entropic risk measures, we perform a parameter analysis. The third chapter provides a link between classical and pathwise Malliavin calculus. We define and analyze pathwise directional derivatives via perturbations with Cameron-Martin functions, (Hölder-)continuous functions, discontinuous functions and measures, thereby including both the traditional Malliavin derivative and the vertical derivative from Dupire’s work.
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Osterrieder, Jörg Robert. "Arbitrage, the limit order book and market microstructure aspects in financial market models." kostenfrei, 2007. http://e-collection.ethbib.ethz.ch/view/eth:29478.
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Perlin, Marcelo. "The microstructure of fixed income markets : Theory and evidence for the european bond market." Thesis, Henley Business School, 2010. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.533738.
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Maberly, Raylene. "Market Microstructure and Day-of-the-Week Return Patterns." Thesis, University of Canterbury. Accountancy, Finance and Information Systems, 2006. http://hdl.handle.net/10092/854.
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This paper documents a major shift in market microstructure during the period 1990 through 1999. In particular, a dramatic change in the pattern of cash flows by individual and institutional investors is documented. The question becomes, what effect this change has on day-of-the-week return patterns for the Dow Jones Industrial Average, Standard and Poor's 500 index, and Standard and Poor's 500 index futures. I find Monday's return pattern has changed in the decade of the 1990's. Not only is Monday's mean return significantly large and positive for all indices, the entire anomalous pattern occurs from Monday's open to Monday's close - an intraday effect. In addition, I find evidence that trading volume is a factor in explaining the anomalous behaviour of Monday's returns. New York Stock Exchange trading volume is significantly lower on Mondays from the trading volume of other days of the week but the trading activity of individual investors is significantly higher. More recently, individual investors have increased their buying activity on Mondays relative to prior periods. Finally, Monday exhibits the largest returns in the first two trading hours when the Dow Jones Industrial Average returns are decomposed into hourly returns. The research emphasizes the dynamic nature of the time series patterns of stock returns and the suggestion day-of-the-week return patterns are not robust over time. Therefore, familiarity with market microstructure issues is just as important as the statistical techniques utilized.
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Miao, Teng. "Essays in microstructure analysis in the foreign exchange market." Thesis, City University London, 2010. http://openaccess.city.ac.uk/12193/.
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The aim of this thesis is to investigate the effects of foreign exchange order flows on exchange rate and stock market changes, in particular to examine the forecasting power of order flows and better understand the nature of the private information conveyed in order flows in the foreign exchange market. Chapter 1 investigates the performance of foreign exchange customer order flows (six major exchange rates over 3.5 years) as an additional explanatory variable to technical analysis to forecast exchange rate changes by applying genetic algorithm non-linear methodology. Using the interval permutations technique, we suggest that the improvement of order flows to the performance of technical analysis is not consistently present. Chapter 2 examines the role daily customer GBPUSD order flows play in explaining concurrent and future stock market changes in both UK and US, and discusses the heterogeneous effects from different groups of customers. The basic hypothesis tested is that if foreign exchange order flows have days-ahead effects on future stock market changes, it suggests that at least a part of the information carried by foreign exchange order flows is relevant for stock markets. Using daily GBPUSD order flows over 3.5 years from 2002 to 2006 provided by RBS, we find that: 1) impacts of order flows from corporate customers on stock markets are positive, while impacts of order flows from unleveraged financial institutions are negative; 2) impacts of corporate order flows are longer than those of financial order flows, especially for the US stock market, suggesting that the two groups of customers may hold different types of private price-relative information. We hypothesize that corporate customers of the bank are mainly based in the UK. When the world economy is doing well, multi-national companies are selling more goods in the US and repatriate more foreign currencies back to UK, during which more GBP or EUR are converted from US Dollars. More sales of US Dollars then reflect the good future prospects of the world economy and stocks listed in both US and UK will rise in value. For unleveraged financial institutions, when the world economy is going bad, clients of those mutual funds which are based in the UK will ask for redemptions of their funds. Assuming the bank services a client base that is UK oriented, this leads to the repatriation of money from abroad back to UK. The buying of GBP or EUR in exchange for US Dollars then takes place alongside sales of US and UK stocks. Foreign exchange flows into GBP or EUR from unleveraged funds forecast poor future stock market returns globally. Chapter 3 empirically tests the effects of EURUSD order flows from different groups of counterparties on the US stock market changes at high frequencies ranging from 1-minute to 30-minute, using a unique set of tick-by-tick order flows data obtained from a leading European commercial bank. We find that: 1) Order flows from “corporates” are positively related to exchange rate changes, while order flows from “financials” are negatively signed, which contradict many well-documented papers such as Evans and Lyons (2002a) (this high frequency forecasting power partly explain the failure of the trading strategy based on our daily order flows data in chapter); 2) The effects of order flows from “financials” are negative on stock market changes, while the effects of orders from “corporates” are positive on stock market changes, which further confirms our findings in chapter 2. Similar to chapter 2, the cross market effects documented in chapter 3 also suggest that there is information content in foreign exchange order flows and that it is likely to be macroeconomic in nature, relevant for stock markets. Chapter 4 concludes and suggests some directions of refinements and further research.
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Sun, Yuxin. "UK equity market microstructure in the age of machine." Thesis, University of Edinburgh, 2018. http://hdl.handle.net/1842/31413.
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Financial markets perform two major functions. The first is the provision of liquidity in order to facilitate direct investment, hedging and diversification; the second is to ensure the efficient price discovery required in order to direct resources to where they can be best utilised within an economy. How well financial markets perform these functions is critical to the financial welfare of every individual in modern economies. As an example, retirement savings across the world are mostly invested in capital markets. Hence, the functioning of financial markets is linked to the standard of living of individuals. Technological advancements and new market regulations have in recent times significantly impacted how financial markets function, with no period in history having witnessed a more rapid pace of change than the last decade. Financial markets have become very complex, with most of the order execution now done by computer algorithms. New high-tech trading venues, such as dark pools, also now play outsized roles in financial markets. A lot of the impacts of these developments are poorly understood. In the EU particularly, the introduction of the Markets in Financial Instruments Directive (MiFID) and advancements in technology have combined to unleash a dramatic transformation of European capital markets. In order to better understand the role of high-tech trading venues in the modern financial markets' trading environment generally and in the UK in particular, I conduct three studies investigating questions linked to the three major developments in financial markets over the past decade; these are algorithmic/high-frequency trading, market fragmentation and dark trading. In the first study, I examine the changing relationship between the price impact of block trades and informed trading, by considering this phenomenon within a high-frequency trading environment on intraday and inter-day bases. I find that the price impact of block trades is stronger during the first hour of trading; this is consistent with the hypothesis that information accumulates overnight during non-trading hours. Furthermore, private information is gradually incorporated into prices despite heightened trading frequency. Evidence suggests that informed traders exploit superior information across trading days, and stocks with lower transparency exhibit stronger information diffusion effects when traded in blocks, thus informed block trading facilitates price discovery. The second study exploits the regulatory differences between the US and the EU to examine the impact of market fragmentation on dimensions of market quality. Unlike the US's Regulation National Market System, the EU's MiFID does not impose a formal exchange trading linkage or guarantee a best execution price. This has raised concerns about consolidated market quality in increasingly fragmented European markets. The second study therefore investigates the impact of visible trading fragmentation on the quality of the London equity market and find a quadratic relationship between fragmentation and adverse selection costs. At low levels of fragmentation, order flow competition reduces adverse selection costs, improves market transparency and enhances market efficiency by reducing arbitrage opportunities. However, high levels of fragmentation increase adverse selection costs. The final study compares the impact of lit and dark venues' liquidity on market liquidity. I find that compared with lit venues, dark venues proportionally contribute more liquidity to the aggregate market. This is because dark pools facilitate trades that otherwise might not easily have occurred in lit venues when the spread widens and the limit order queue builds up. I also find that informed and algorithmic trading hinder liquidity creation in lit and dark venues, while evidence also suggests that stocks exhibiting low levels of informed trading across the aggregate market drive dark venues' liquidity contribution.
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Abd, Karim Mohomad Nazri Bin. "Bursa Malaysia index series revision effects on market microstructure." Thesis, University of Hull, 2016. http://hydra.hull.ac.uk/resources/hull:14382.
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This thesis presents three interrelated empirical chapters on the Bursa Malaysia index series revisions effects on market microstructure. In the first empirical chapter, “The Effect of Changes in the Composition of the FTSE Bursa Malaysia Indices on Stock Price and Volume", the effect of re-constituents of the main indices (Big Cap, Mid Cap and Small Cap) on stock price and trade volume is investigated, using a data sample which comprises information dated from the time period between 2005 and 2012. An event-study methodology is employed to evaluate the effects of stock market reactions to extraneous event. I employ short term and long term event-window analysis for abnormal returns using cumulative abnormal return (CAR) and Buy and Hold Abnormal Return (BHAR). Harris and Gurel (1986) Volume Ratio (VR) methodology is used to test for abnormal trade volume. The results provide new empirical evidence supporting several hypotheses as previously studied in the literature. Empirical evidence supporting the Price Pressure Hypotheses (PPH) is found for both additions to and deletions from the Blue Chip Index, KLCI 30. There are positive abnormal returns for stocks added to the Mid Cap Index, KLCI 70 with a persistent increase in volume in the post event-window are observed, which supports the Information Cost Liquidity Hypotheses (ICLH) and results for the deletions support the Information Hypotheses (IH). The results support the Imperfect Substitute Hypotheses in the case of stocks added to the Small Cap index. The second empirical chapter studies “The Effect of the FTSE Bursa Malaysia Index Series Changes on Stocks Liquidity”. In this chapter, the effect of index revision on stock liquidity is investigated. This investigation is important particularly with regard to stocks added to the Mid Cap Index in order to assert my previous results regarding the ICLH as some researchers consider trade volume as an unsuitable liquidity proxy due to the double counting. Instead, a variety of liquidity measures are employed to capture multi-dimensional liquidity aspects. Specifically the study focuses on trading cost and price impact ratio as two different liquidity dimensions. Liquidity changes adapting Hedge and McDermott’s (2003) methodology is used; a pooled time series cross-sectional multivariate analysis of bid-ask spreads and also price impact ratios. Bid-ask spread (quoted), bid-ask spread (effective), Amihud’s (2002) RtoV, Florackis et al.’s (2011) RtoTR and a new price impact ratio, the RtoTRF (free float adjusted) are employed. The study is extended by examining the investability weight change in order to identify the type of shareholders that contribute more to the liquidity improvement. Evidence that supports the ICLH for stocks added to the KLCI 70 is found which confirms the earlier investigation using trade volume. More importantly, the finding support Florackis et al.’s (2011) argument on the advantages of their price impact ratio over Amihud’s (2002) liquidity ratio in terms of market capitalisation bias. Furthermore, the new liquidity measure, RtoTRF, prove to have better “encapsulation power” (at least for the Malaysian stock market) when compare to the Amihud’s (2002) liquidity measure, RtoV. The third empirical chapter investigates the effect of liquidity improvements on investment opportunities, entitled: “Does Liquidity Increase Investment Opportunity? Evidence from the Bursa Malaysia KLCI 70”. In this chapter, the relationship between improved stock liquidity and investment opportunity is investigated in light of the firms added to the Mid Cap Index. The liquidity premium hypotheses (LPH) is examined by testing whether investment opportunities increase with stock liquidity. Tobin’s Q, capital expenditures, Return on Assets (ROA) and Price Earnings (PE) ratio are used for growth opportunities and find a statistical significant increase in those depended variables after the stocks being added to the index. Amihud’s (2002) RtoV, Florackis et al.’s (2011) RtoTR and the RtoTRF ratios are proxied as liquidity measures and find that the firms whose stocks were added to the KLCI 70 had a significant increase in capital expenditures and PE ratio. The findings are consistent with those of Becker-Blease and Paul (2006). Therefore, it shows that the stock liquidity improvements associated with additions to the KLCI 70 affects firm’s investment decisions. For the LPH, it shows that investors demand lower returns on more liquid stocks and, which reduces the cost of capital and enhances growth opportunities.
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Balardy, Clara. "Auction and continuous market for power : organization and microstructure." Thesis, Paris Sciences et Lettres (ComUE), 2019. http://www.theses.fr/2019PSLED031.
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Cette thèse s’intéresse aux marchés spot de l’électricité et plus particulièrement à l’organisation et la conception de ces derniers. En effet, l’industrie électrique fait face à de nouveaux défis dues à l’augmentation de la capacité de production renouvelable mais également dues à des changements plus structurels liés aux comportements des acteurs. La régulation et les plateformes d’échange doivent s’adapter à ces changements afin de veiller à l’efficacité du marché dans son ensemble.Le premier chapitre de la thèse étudie en détails la formation de la liquidité sur le marché continu allemand. Il s’intéresse particulièrement à l’évolution de la fourchette bid-ask au cours d’une session d’échange et les facteurs qui l’influencent. Dans un second chapitre, j’évalue quantitativement l’effet de la création d’une enchère avant le début d’un marché continu sur la liquidité, la volatilité et la concentration du marché. La dernière partie de la thèse étudie théoriquement l’impact de l’intégration verticale dans des marchés séquentiels ainsi que l’impact de la tarification en temps réel pour les consommateurs finaux sur le comportement des acteurs du marchéThe present thesis is interested in the power spot market, particularly its organization and design. The electricity industry faces new challenges due to the increasing intermittent renewable capacity but also due to the structural transformations linked to the changes of participants’ behaviors. Regulation and exchanges should adapt to those changes in order to ensure the efficiency of the market. The first chapter of the thesis extensively studies the liquidity formation on the German continuous market. It analyzes the evolution of the bid-ask spread along a trading session and the main drivers of it. In a second chapter, I quantitatively evaluate the effect of the introduction of a call auction before the start of a trading continuous session in terms of liquidity, volatility and competition. The last chapter of the thesis theoretically studies the impact of vertical integration in sequential markets as well as the impact of the real-time pricing on market participants’ behavior
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Tillman, Måns. "On-Line Market Microstructure Prediction Using Hidden Markov Models." Thesis, KTH, Matematisk statistik, 2017. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-208312.
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Over the last decades, financial markets have undergone dramatic changes. With the advent of the arbitrage pricing theory, along with new technology, markets have become more efficient. In particular, the new high-frequency markets, with algorithmic trading operating on micro-second level, make it possible to translate ”information” into price almost instantaneously. Such phenomena are studied in the field of market microstructure theory, which aims to explain and predict them. In this thesis, we model the dynamics of high frequency markets using non-linear hidden Markov models (HMMs). Such models feature an intuitive separation between observations and dynamics, and are therefore highly convenient tools in financial settings, where they allow a precise application of domain knowledge. HMMs can be formulated based on only a few parameters, yet their inherently dynamic nature can be used to capture well-known intra-day seasonality effects that many other models fail to explain. Due to recent breakthroughs in Monte Carlo methods, HMMs can now be efficiently estimated in real-time. In this thesis, we develop a holistic framework for performing both real-time inference and learning of HMMs, by combining several particle-based methods. Within this framework, we also provide methods for making accurate predictions from the model, as well as methods for assessing the model itself. In this framework, a sequential Monte Carlo bootstrap filter is adopted to make on-line inference and predictions. Coupled with a backward smoothing filter, this provides a forward filtering/backward smoothing scheme. This is then used in the sequential Monte Carlo expectation-maximization algorithm for finding the optimal hyper-parameters for the model. To design an HMM specifically for capturing information translation, we adopt the observable volume imbalance into a dynamic setting. Volume imbalance has previously been used in market microstructure theory to study, for example, price impact. Through careful selection of key model assumptions, we define a slightly modified observable as a process that we call scaled volume imbalance. The outcomes of this process retain the key features of volume imbalance (that is, its relationship to price impact and information), and allows an efficient evaluation of the framework, while providing a promising platform for future studies. This is demonstrated through a test on actual financial trading data, where we obtain high-performance predictions. Our results demonstrate that the proposed framework can successfully be applied to the field of market microstructure.Under de senaste decennierna har det gjorts stora framsteg inom finansiell teori för kapitalmarknader. Formuleringen av arbitrageteori medförde möjligheten att konsekvent kunna prissätta finansiella instrument. Men i en tid då högfrekvenshandel numera är standard, har omsättningen av information i pris börjat ske i allt snabbare takt. För att studera dessa fenomen; prispåverkan och informationsomsättning, har mikrostrukturteorin vuxit fram. I den här uppsatsen studerar vi mikrostruktur med hjälp av en dynamisk modell. Historiskt sett har mikrostrukturteorin fokuserat på statiska modeller men med hjälp av icke-linjära dolda Markovmodeller (HMM:er) utökar vi detta till den dynamiska domänen. HMM:er kommer med en naturlig uppdelning mellan observation och dynamik, och är utformade på ett sådant sätt att vi kan dra nytta av domänspecifik kunskap. Genom att formulera lämpliga nyckelantaganden baserade på traditionell mikrostrukturteori specificerar vi en modell—med endast ett fåtal parametrar—som klarar av att beskriva de välkända säsongsbeteenden som statiska modeller inte klarar av. Tack vare nya genombrott inom Monte Carlo-metoder finns det nu kraftfulla verktyg att tillgå för att utföra optimal filtrering med HMM:er i realtid. Vi applicerar ett så kallat bootstrap filter för att sekventiellt filtrera fram tillståndet för modellen och prediktera framtida tillstånd. Tillsammans med tekniken backward smoothing estimerar vi den posteriora simultana fördelningen för varje handelsdag. Denna används sedan för statistisk inlärning av våra hyperparametrar via en sekventiell Monte Carlo Expectation Maximization-algoritm. För att formulera en modell som beskriver omsättningen av information, väljer vi att utgå ifrån volume imbalance, som ofta används för att studera prispåverkan. Vi definierar den relaterade observerbara storheten scaled volume imbalance som syftar till att bibehålla kopplingen till prispåverkan men även går att modellera med en dynamisk process som passar in i ramverket för HMM:er. Vi visar även hur man inom detta ramverk kan utvärdera HMM:er i allmänhet, samt genomför denna analys för vår modell i synnerhet. Modellen testas mot finansiell handelsdata för både terminskontrakt och aktier och visar i bägge fall god predikteringsförmåga.
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Jeong, Heon Mok. "Stock price reversals : market microstructure and intraday price movements." Connect to resource, 1993. http://rave.ohiolink.edu/etdc/view.cgi?acc%5Fnum=osu1266069236.
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