| Strategic Trading in Illiquid Markets 2005 Edition Contributor(s): Mönch, Burkart (Author) |
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ISBN: 3540250395 ISBN-13: 9783540250395 Publisher: Springer OUR PRICE: $52.24 Product Type: Paperback Published: April 2005 Annotation: This volume considers trading strategies in illiquid markets from three perspectives. The first chapter presents an innovative approach to investigate the interactions between the trading activities of a large investor, the stock price, and liquidity. The framework generalizes existing models by introducing a stochastic liquidity factor. The flexibility of the framework is illustrated by an application that deals with the pricing of a liquidity derivative. The second chapter focuses on a new pragmatic approach to determine optimal liquidation strategies if an investor uses market orders to unwind large security positions in an illiquid market. The third chapter devotes special attention to iceberg orders. It presents a parsimonious framework that allows to analyze the rationale for the use of this order type by assessing the costs and benefits of this trading instrument. |
| Additional Information |
| BISAC Categories: - Business & Economics | Finance - General - Mathematics | Applied - Business & Economics | Economics - Macroeconomics |
| Dewey: 332.64 |
| Series: Lecture Notes in Economic and Mathematical Systems |
| Physical Information: 0.33" H x 6.14" W x 9.27" (0.46 lbs) 118 pages |
| Descriptions, Reviews, Etc. |
| Publisher Description: The Area of Research and the Object of Investigation In this thesis we will investigate trading strategies in illiquid markets from a market microstructure perspective. Market microstructure is the academic term for the branch of financial economics that investigates trading and the organization of security markets, see, e. g., Harris (2002). Historically, exchanges evolved as a location, where those interested in buy- ing or selling securities could meet physically to transact. Thus, traditionally security trading was organized on exchange floors, where so-called dealers arranged all trades and provided liquidity by quoting prices at which they were willing buy or sell. Consequently, the initial surge of the market mi- crostructure literature focused predominantly on this type of market design, which is often referred to as quote-driven. Nowadays, the interest is shifting towards order-driven markets. Beginning with the Toronto Stock Exchange in the mid 1970s and increasing in fre- quency and scope, this market structure has emerged as the preeminent form of security trading worldwide. In order-driven markets, exchanges arrange trades by matching public orders, often by employing automatic execution systems. Introduction A major difference between a quote-driven and an order-driven market arises from the transparency pre- and post-trade. The pre-trade transparency con- cerns the question whether the order book is visible to the keeper only, or whether it is open to the public. |