Market microstructure and electronic trading, Financial Accounting

1. You (Exchange) have just filled an order and notified involved traders of their fills. Next you must tell the world about this trade.

Suppose you flip a coin. You flip a coin every second. Once you flip heads, you (Exchange) send your message ("Trade Done") to your friend (Tape Broadcaster). Your friend flips a coin until heads. Then the message ("Trade Done") is sent to the Tape.

Plot the probability of each number of tails Exchange and Tape Broadcaster get (together) before the message is sent to the Tape. You may simulate the results or find the theoretically correct answer.

2. What economic incentives exist to reduce the time for a message to get sent to the Tape?

3. Apply the models of Chacko, Jurek, and Stafford (2008) - aka Torre (1997) - and Almgren, Thum, Hauptmann, and Li (2005) to estimate the impact of the following trades. Use the parameters on page 1278 (of the Chacko et al. JF article) to estimate the impact in basis points

(bp) for a trade of:

(a) $1MM of a $250MM firm with 5MM shares outstanding? $10MM?

(b) $1MM of a $900MM firm with 50MM shares outstanding? $10MM?

(c) $1MM of a $1.5BB firm with 75MM shares outstanding? $10MM?

(d) $1MM of a $4BB firm with 200MM shares outstanding? $10MM?

(e) $1MM of a $16BB firm with 1BB shares outstanding? $10MM?

You may write on one of two topics. Use full sentences and convincing arguments to express your view. I will grade the essays based on how convincing, polished, and succinct they are. (Forego five fancy phrases when six short words will suffice.)

Agree or disagree with one of these statements. Write two to four pages in 12-point font.

Statement 1: "Market microstructure is the latest fad. The issues we've covered may be relevant now but are strictly mechanical concerns and will be irrelevant in fifty years time."

Statement 2: "For any trading strategy, a good trader must constantly be 'in the market' if she expects to make money. If you are not trading, you are wasting your time; go do something productive."

Posted Date: 2/22/2013 1:54:11 AM | Location : United States







Related Discussions:- Market microstructure and electronic trading, Assignment Help, Ask Question on Market microstructure and electronic trading, Get Answer, Expert's Help, Market microstructure and electronic trading Discussions

Write discussion on Market microstructure and electronic trading
Your posts are moderated
Related Questions
a) The actual risk-free rate is 3%, and inflation is usual to be 2% for the next 2 years. A 2-year Treasury security yields 6.7%. What is the maturity risk premium for the 2-year s

Revenue expenditures 1. Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities 2. Are known as balance sheet expenditu

Question: Agatha Co. is a trading company making up its accounts regularly to 31 December each year. At 01 January 2005 the following balances existed in the records of Agat

LessorMfg Corp. is a manufacturer of heavy equipment. On January 1, 2013, LessorMfg Corp. leases equipment to Small Company under a six-year noncancelable lease agreement. The foll

Answer both parts in this task. Part (i) is worth a maximum of 10 Marks, while part (ii) is worth a maximum of 5 Marks. (i) Minnie owes Micky Mouse $500 and hands him a cheque p

If revenue=£92 million, purchase costs=£48 million and operating costs=£41 million, and if working capital days are 39 for inventory and 110 for accounts payable, what is the worki

On May 2, 1986, Hannah acquired residential real estate for $450,000. Of the cost, $100,000 was allocated to the land and $350,000 to the building. On January 20, 2013, the buildin

Please prove that the maximum throughput of input queued switch is 0.586 when switch size N approaches infinity. Assume the incoming traffic is uniformly distributed. Please dem


Problem 1 Seven years ago a semi-annual coupon bond with a 10% coupon rate, $1,000 face value and 15 years to maturity was issued by Corn Inc.. Teddy bought this bond two years ag