AØKK08396U Financial Markets Microstructure (F)
This course examines the financial markets from a Micro perspective. How does a “market” as we know it form from individual traders’ actions? How is the market price determined from individual trades and offers? How is the traders’ dispersed information incorporated into these prices? What determines the liquidity and depth of an asset market? What is the optimal behaviour for traders in financial markets? Why do bubbles and crashes arise? Do the institutional details of the exchange influence this price formation process? If so, how should exchanges and regulators ideally design the rules of trading? Is there a role for market making, should the market be fully transparent, should insider trading be permitted, should transactions be taxed, and is high-frequent trading good or bad for the market?
In this course we will address these and related questions. The course seeks to give a broad introduction to the field of Financial Markets Microstructure covering theory, evidence and policy. It also provides deeper insight on topics of current interest on the basis of selected current research papers.
The course partly gives participants a review of the facts on financial markets, partly presents the key theoretical models, and partly addresses how the models are applied to the important issues.
After completing the course the student is expected to be able to:
Define types of financial markets and their characteristics
Account for the standard theoretical models used to model financial markets
Discuss current issues in the financial markets literature
Set up financial market problems as game-theoretic models
Analyze price formation in different types of financial markets and derive results on measures such as liquidity and market depth
- Analyze the pros and cons of different market structures seen from the perspectives of different market participants
Explain and discuss key theoretical concepts from academic articles, as well as discuss their interpretation
Apply the most relevant theoretical apparatus to analyze case-based problems
Thierry Foucault, Marco Pagano and Ailsa Röell: “Market Liquidity: Theory Evidence and Policy,” Oxford University Press, 2013. 439 pages.
Various papers that will be announced later.
2 hours lectures one to two times a week from week 6 to 20 (except holidays).
The overall schema can be seen at KUnet:
MSc in Economics => "courses and teaching" => "Planning and overview" => "Your timetable"
KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"
Timetable and venue:
To see the time and location of lectures please press the link under "Se skema" (See schedule) at the right side of this page (F means Spring).
You can find the similar information in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F20; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Forår/Spring – Week 5-30”
Press: “ View Timetable”
- Class Exercises
The lecturer gives collective oral feedback during lectures and individual oral feedback upon request.
Registration and information for foreign students not enrolled please find more information at Study Economics.
Læs om uddannelsen og studieordningen på KA uddannelsen i økonomi.
- 7,5 ECTS
- Type of assessment
- Written assignment, 12 hoursindividual take-home exam. It is not allowed to collaborate on the assignment with anyone.
The exam assignment is in English and must be answered in English.
- Exam registration requirements
There are no requirements during the course that the student has to fulfill to be able to sit the exam.
- All aids allowed
- Marking scale
- 7-point grading scale
- Censorship form
- No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
- Exam period
The exam takes place :
12 June 2020 from 10 AM to 10 PM
In special cases, the exam date can be changed to another day and time within the exam period.
The reexam takes place:
23 August 2020 from 10 AM to 10 PM
NOTE: If only few students register for the written re-exam, the re-exam might change to a 20 minutes oral examination with 20 minutes preparation time. All written aids allowed during the preparation time, no aids allowed during the examination.
If changed to an oral re-exam, the exam date, time and place might change as well. The Examination's Office then inform the students by KU e-mail.
Info is available in Digital Exam early August.
Criteria for exam assesment
Students are assessed on the extent to which they master the learning outcome for the course.
To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.