Trades, Quotes and Prices: Financial Markets Under the Microscope
Cambridge University Press, 3/22/2018
EAN 9781107156050, ISBN10: 110715605X
Hardcover, 460 pages, 25.4 x 17.8 x 2.5 cm
Language: English
The widespread availability of high-quality, high-frequency data has revolutionised the study of financial markets. By describing not only asset prices, but also market participants' actions and interactions, this wealth of information offers a new window into the inner workings of the financial ecosystem. In this original text, the authors discuss empirical facts of financial markets and introduce a wide range of models, from the micro-scale mechanics of individual order arrivals to the emergent, macro-scale issues of market stability. Throughout this journey, data is king. All discussions are firmly rooted in the empirical behaviour of real stocks, and all models are calibrated and evaluated using recent data from Nasdaq. By confronting theory with empirical facts, this book for practitioners, researchers and advanced students provides a fresh, new, and often surprising perspective on topics as diverse as optimal trading, price impact, the fragile nature of liquidity, and even the reasons why people trade at all.
Preface
Part I. How and Why Do Prices Move?
1. The ecology of financial markets
2. The statistics of price changes
an informal primer
Part II. Limit Order Books
Introduction
3. Limit order books
4. Empirical properties of limit order books
Part III. Limit Order Books
Models
5. Single-queue dynamics
simple models
6. Single-queue dynamics for large-tick stocks
7. Joint-queue dynamics for large-tick stocks
8. The Santa Fe model for limit order books
Part IV. Clustering and Correlations
9. Time clustering and Hawkes processes
10. Long-range persistence of order flow
Part V. Price Impact
11. The impact of market orders
12. The impact of metaorders
Part VI. Six Market Dynamics at the Micro-scale
13. The propagator model
14. Generalised propagator models
Part VII. Adverse Selection and Liquidity Provision
15. The Kyle model
16. The determinants of the bid–ask spread
17. The profitability of market making
Part VIII. Market Dynamics at the Meso-scale
18. Latent liquidity and Walrasian auctions
19. Impact dynamics in a continuous-time double auction
20. The information content of prices
Part IX. Practical Consequences
21. Optimal execution
22. Market fairness and stability
23. Appendices
Index.