Agenda

07 Giu 2017 11:00

Fast traders and slow price adjustments

Aula Saraceno - Department of Management

Title: Fast traders and slow price adjustments: an artificial market with strategic interaction and transaction costs

Seminar held by Danilo Liuzzi, research fellow, Department of Management

In this paper we propose an artificial market to model high frequency trading where (fast) agents strategically use thresholds rules to issue orders based on a signal on the level of stochastic liquidity prevailing on the market. A (slow) market maker is in charge to daily set the closing price and adjust transaction costs to control for the volatility of returns and market activity. We first show that a baseline version of the model with no frictions is able to generate returns endowed with several stylized facts, thus suggesting that the two time-scales used in the model are one (and possibly novel) way to obtain realistic market outcomes and that high-frequency trading can amplify liquidity shocks. We then explore whether transaction costs can be used to control excess volatility and improve market quality. While properly implemented taxation schemes may help in reducing the volatility, care is needed to avoid to excessively reduce activity in the market and intensify the occurence of abnormal peaks in returns.

Lingua

L'evento si terrà in italiano

Organizzatore

Department of Management

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