Dear all, you're invited to the next seminar in Probability and Finance that will take place next Monday, at 4 pm, in hybrid mode. All the details follow:
* Speaker: Prof. Umut Cetin (LSE) * Date and time: Monday 6th June 2022, 4pm * Room (Torre Archimede): 1BC45 * Zoom link: please find it here https://www.math.unipd.it/~bianchi/seminari/
* Title: POWER LAWS IN MARKET MICROSTRUCTURE * Abstract: We develop an equilibrium model for market impact of trades when investors with private signals execute via a trading desk. Fat tails in the signal distribution lead to a power law for price impact, while the impact is logarithmic for lighter tails. Moreover, the tail distribution of the equilibrium trade volume obeys a power law. The spread decreases with the degree of noise trading and increases with the number of insiders. In case of a monopolistic insider, the last slice traded against the limit order book is priced at the fundamental value of the asset reminiscent of Kyle (1985). However, competition among insiders leads to aggressive trading, hence vanishing profit in the limit. The model also predicts that the order book flattens as the amount of noise trading increases converging to a model with proportional transactions costs with non-vanishing spread.
See you soon, Giorgia