Market Microstructure from Coursera

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Syllabus

Basics

This module presents the subject of the course and its main concepts: liquidity and price discovery, and basic notions of trading in securities markets.

Measuring liquidity

In this week you will learn that some trading costs are explicit, others implicit, and how to measure trading costs using different types of data. Furthermore, you will learn how to take the time dimension of trading into account.

Price dynamics and Liquidity (part 1)

This module talks about price formation in markets with asymmetric information. You’ll understand why in these markets prices respond to the order flow and you’ll know how the informativeness of the order flow affects market liquidity and price discovery.

Price dynamics and Liquidity (part 2)

In this week we’ll talk about frictions that contribute to the bid-ask spread and generate mean reversion in prices and you’ll learn about order processing costs. Moreover, you’ll know the imperfect competition among market makers and how inventory holding costs of risk-averse dealers.

Trade side and Market Depth

This week will explain how orders of different sizes have a different impact on prices and how price impact is an inverse measure of market depth. You’ll learn that depth is affected by order flow informativeness, market risk absorption capacity and competition between liquidity suppliers.

Algorithmic and High-Frequency Trading

By the end of this week, you will learn the fundamentals of algorithmic and high-frequency trading, their impact on market quality, and explore policies to mitigate trading speed effects.

Good to know

Know what's good

, what to watch for

, and possible dealbreakers

Explores security trading, which is a fundamental part of finance

Examines how liquidity affects price discovery, which is essential for transparent and efficient markets

Taught by Marco Pagano, a recognized expert in the field of securities markets

Develops understanding of algorithmic and high-frequency trading, which are shaping the future of financial markets

May require some background in finance or economics for full comprehension

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Market Microstructure with these activities:

Financial Markets and Institutions

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Read and understand the concepts of money and capital markets, financial regulation, and banking systems.

View Financial Markets and Institutions ISE on Amazon

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Read assigned chapters and complete related exercises
Discuss key concepts with peers or a study group

Learn Statistical Software (R)

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Develop proficiency in statistical software (R) to analyze and interpret financial data.

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Complete online tutorials or workshops on R programming
Practice using R for basic data manipulation, visualization, and statistical analysis
Gain familiarity with packages like tidyverse and quantmod

Review econometrics

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Review econometrics to strengthen knowledge and prepare for the upcoming course in securities markets.

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Review basic econometric methods and concepts
Practice solving econometric problems
Focus on the econometric tools for time series analysis, such as ARIMA and GARCH models

Seven other activities

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Discussion Forums

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Actively participate in discussion forums to engage with peers, exchange ideas, and clarify concepts related to securities markets.

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Regularly participate in online discussion forums
Post thoughtful questions and responses
Engage in discussions with diverse perspectives

Attend Industry Workshops

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Attend industry workshops to gain insights from experts, learn about best practices, and stay up-to-date on the latest trends in securities markets.

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Identify and register for relevant industry workshops
Attend the workshops and actively participate in discussions
Connect with professionals and experts in the field

Analyze Market Depth Data

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Analyzing market depth data can help you understand how orders of different sizes impact prices and how price impact is an inverse measure of market depth.

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Gather market depth data from a financial data provider or exchange.
Clean and preprocess the data to remove any errors or inconsistencies.
Calculate the bid-ask spread, depth, and other relevant metrics.
Analyze the data to identify patterns and trends in market depth.
Use the insights gained from the analysis to make better trading decisions.

Contribute to Open Source Projects

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Contribute to open source projects related to financial technologies or data analysis to apply theoretical knowledge and gain practical experience.

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Identify open source projects in the financial technology or data analysis domain
Review the project's documentation and contribute to discussions
Submit bug reports or feature requests
Make code contributions to improve or enhance the project's functionality

Industry Research Report

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Conduct in-depth research on a specific industry or company to gain practical insights and enhance understanding of securities markets.

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Identify an industry or company of interest
Gather and analyze financial data, market trends, and industry dynamics
Develop insights into the company's performance, competitive landscape, and future prospects
Present the findings in a well-written report

Explore Algorithmic and High-Frequency Trading

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Algorithmic and high-frequency trading have a significant impact on market quality. By exploring these concepts, you can gain a deeper understanding of how they affect the markets.

Browse courses on Algorithmic Trading

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Find online tutorials or courses on algorithmic and high-frequency trading.
Follow the tutorials to learn about the different types of algorithms and trading strategies used.
Experiment with different algorithms and strategies in a simulated trading environment.
Analyze the results of your experiments to identify which algorithms and strategies are most effective.
Apply your knowledge to real-world trading.

Develop a Trading Strategy

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Developing a trading strategy can help you apply the concepts you learn in this course to real-world trading.

Browse courses on Trading Strategy

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Identify your trading goals and objectives.
Research different trading strategies and select one that aligns with your goals.
Develop a trading plan that outlines your entry and exit points, risk management parameters, and other trading rules.
Backtest your trading strategy using historical data.
Implement your trading strategy in a live trading environment.

Career center

Learners who complete Market Microstructure will develop knowledge and skills that may be useful to these careers:

Quantitative Researcher

Quantitative researchers are responsible for developing and implementing mathematical models to help investment firms make better decisions. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as measuring trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a quantitative researcher.

See salaries and explore the career path for Quantitative Researcher

Portfolio Manager

Portfolio managers are responsible for managing the investments of individuals and institutions. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a portfolio manager.

See salaries and explore the career path for Portfolio Manager

Financial Analyst

Financial analysts are responsible for providing investment advice to individuals and institutions. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a financial analyst.

See salaries and explore the career path for Financial Analyst

Risk Manager

Risk managers are responsible for identifying and managing risks for financial institutions. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a risk manager.

See salaries and explore the career path for Risk Manager

Investment Banker

Investment bankers are responsible for advising companies on mergers and acquisitions, capital raising, and other financial transactions. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as an investment banker.

See salaries and explore the career path for Investment Banker

Trader

Traders are responsible for buying and selling securities for their own account or for the account of their clients. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a trader.

See salaries and explore the career path for Trader

High-Frequency Trader

High-frequency traders are responsible for trading securities at very high speeds. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a high-frequency trader.

See salaries and explore the career path for High-Frequency Trader

Algorithmic Trader

Algorithmic traders are responsible for developing and implementing computer programs that trade securities. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as an algorithmic trader.

See salaries and explore the career path for Algorithmic Trader

Financial Economist

Financial economists are responsible for conducting research on financial markets and institutions. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a financial economist.

See salaries and explore the career path for Financial Economist

Market Regulator

Market regulators are responsible for regulating the securities markets. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a market regulator.

See salaries and explore the career path for Market Regulator

Market Microstructure Academic

Market microstructure academics are responsible for teaching and conducting research on the structure and function of financial markets. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a market microstructure academic.

See salaries and explore the career path for Market Microstructure Academic

Financial Journalist

Financial journalists are responsible for writing about financial markets and institutions. This course provides a strong foundation in the concepts of price formation and liquidity in securities markets, which are essential for anyone who wants to succeed in this field. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a financial journalist.

See salaries and explore the career path for Financial Journalist

Economist

Economists are responsible for conducting research on economic issues. This course may be useful for economists who want to specialize in financial economics. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as an economist specializing in financial economics.

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Computer Scientist

Computer scientists are responsible for designing and developing computer software. This course may be useful for computer scientists who want to specialize in financial computing. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a computer scientist specializing in financial computing.

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Statistician

Statisticians are responsible for collecting, analyzing, and interpreting data. This course may be useful for statisticians who want to specialize in financial statistics. The course covers topics such as how to measure trading costs, how security prices and liquidity are jointly determined, and how order flow affects prices. This knowledge will give you a competitive edge in the job market and help you to succeed as a statistician specializing in financial statistics.

See salaries and explore the career path for Statistician

Market Microstructure

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