MA3801: Market Microstructure and Trading Theory
| School | Cardiff School of Mathematics |
| Department Code | MATHS |
| Module Code | MA3801 |
| External Subject Code | 100401 |
| Number of Credits | 10 |
| Level | L6 |
| Language of Delivery | English |
| Module Leader | Dr Anqi Liu |
| Semester | Autumn Semester |
| Academic Year | 2022/3 |
Outline Description of Module
This 10 credit module aims to examine the financial market structure beyond pricing processes and incorporate aspects of trading processes of financial instruments. Rational expectation theory is concentrated in order to provide students with sound theoretical frameworks reflecting aspects of trading in terms of information transmission, role of different types of trades and traders, order books and market rationality and efficiency. Empirical studies and practical cases have also been developed promptly in recent years while high frequency trading prospers in particular. This module is also to be include these high-end contents of modern finance based on both theoretical and practical studies.
Prerequisite Module: MA2800 Finance II: Investment Management
On completion of the module a student should be able to
- Form a systematic knowledge and understanding of fundamental market microstructure theories;
- Good interpretation of the composition of financial markets, the use of order books and an in-depth knowledge of the rationale behind their operations;
- Ability to interpret and evaluate the market design in terms of trading rules and framework;
- Ability to apply such frameworks effectively in the analysis of financial problems, especially trading related issues;
- To describe and comment on various types of trading;
- In-depth knowledge of volatility, liquidity and the role of information in trading and pricing processes;
- To devise and sustain arguments of market efficiency through the balance between both high and low frequency trading;
How the module will be delivered
Modules will be delivered through blended learning. You will be guided through learning activities appropriate to your module, which may include:
- Weekly face to face classes (e.g. labs, lectures, exercise classes)
- Electronic resources that you work through at your own pace (e.g. videos, exercise sheets, lecture notes, e-books, quizzes)
Students are also expected to undertake self-guided study throughout the duration of the module.
Skills that will be practised and developed
Skills:
Good knowledge of microstructure theories, important statistical modelling, estimate and diagnostically test econometric models and Data processing skills
Transferable Skills:
Deep understanding of the structure of financial markets and underlying processes driving the market;
Ability to apply and interpret theories
Analytical skills
Assessment Breakdown
| Type | % | Title | Duration(hrs) |
|---|---|---|---|
| Exam - Autumn Semester | 100 | Market Microstructure And Trading Theory | 2 |
Syllabus content
Introduction to market structure and market microstructure
Market integration, de-integration and globalization
Market microstructure 1: Market depth, Order books
Market microstructure 2: Traders, market makers and machines (Algorithms)
Market microstructure 3: Inventory Models
Market microstructure 4: Information Models
Volatility, liquidity and market efficiency
Market design 1: stock exchange trading frameworks
Market design 2: High Frequency Trading and Proprietary trading
Rational Expectation Theories