COMPGF04 - Financial Market Modelling and Analysis

This database contains the 2017-18 versions of syllabuses. Syllabuses from the 2016-17 session are available here.

Note: Whilst every effort is made to keep the syllabus and assessment records correct, the precise details must be checked with the lecturer(s).

CodeCOMPGF04
YearMSc
PrerequisitesN/A
Term2
Taught ByChris Clack (100%)
Aims

This module will introduce students to the field of modelling and analysing financial markets with emphasis on (i) the wide variety of deterministic and discrete-time methods that are available; and (ii) numerical simulation of the financial markets, including agent-based modeling.

Learning Outcomes

The students will be able to distinguish between different types of modeling and analysis, and explain the advantages and disadvantages of each method; they will gain an understanding of discrete-time dynamic optimisation methods; they will gain an understanding of numerical simulation methods, including both agent-based techniques and the use of recurrence relations.

Content

  1. Introduction to the Financial Markets

    • Market Microstructure
    • Order-driven and Quote-driven markets
    • Orders, Quotes and Trades
    • Post-trade processing
    • Regulation
    • Trading Strategies
    • Risk Management

  2. Markets

    • Auctions
    • Markets
    • Dealer Markets and Order-Book Markets
    • Market Making
    • Low latency and High Frequency Trading

  3. Introduction to Techniques

    • Game Theory
    • Minority Games
    • Agent Based Models
    • Dynamic Optimisation

  4. Specific models

    • Day & Juang - Bulls, Bears and Market Sheep
    • Lyons - The Foreign Exchange Hot Potato
    • Huang et al - Optimal Market Making with Risk Aversion
    • Instability arising from coupled dealer algorithms

Method of Instruction

Lecture presentations.

Assessment

The course has the following assessment component:

  • Written Examination (2.5 hours, 100%)

To pass this course, students must:

  • Obtain an overall pass mark of 50%

Resources

Reading list available via the UCL Library catalogue.