Market Microstructure Theory preview
Efficient Market Hypothesis is obsolete, Market Microstructure Theory is what's relevant for today's high tech Wall St. scene. Despite the age of this book (1995), the author provides some solid theory and analytical models for the serious market participant.
Interesting points from the book
Coming from an academic, O'Hara displays a very deep understanding of financial trading along with the nature of price evolutions and "The Nature of Markets". She explores behavior models of market makers, informed, and uninformed traders with respect to auction types utilized.
Inventory Management is a big issue for market makers, or really anyone who applies strategies involving position accumulations.
Game Theory is touched upon, as expected in today's algorithmic trading scene, as big players attempt to outwit each other.
Prerequisites to understanding the models
The models do get relatively technical. This book requires an intermediate understanding in microeconomics, deep understanding in statistics, and some matrix calculus.
Overall conclusion
Though I don't believe the models themselves provide money making solutions directly. Understanding how they work, and figuring out ways to remedy their shortcomings could lead to some brilliant thoughts around trading today's tough markets. Nevertheless, it's an interesting read if anything.
Efficient Market Hypothesis is obsolete, Market Microstructure Theory is what's relevant for today's high tech Wall St. scene. Despite the age of this book (1995), the author provides some solid theory and analytical models for the serious market participant.
Interesting points from the book
Coming from an academic, O'Hara displays a very deep understanding of financial trading along with the nature of price evolutions and "The Nature of Markets". She explores behavior models of market makers, informed, and uninformed traders with respect to auction types utilized.
Inventory Management is a big issue for market makers, or really anyone who applies strategies involving position accumulations.
Game Theory is touched upon, as expected in today's algorithmic trading scene, as big players attempt to outwit each other.
Prerequisites to understanding the models
The models do get relatively technical. This book requires an intermediate understanding in microeconomics, deep understanding in statistics, and some matrix calculus.
Overall conclusion
Though I don't believe the models themselves provide money making solutions directly. Understanding how they work, and figuring out ways to remedy their shortcomings could lead to some brilliant thoughts around trading today's tough markets. Nevertheless, it's an interesting read if anything.
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