لایب سان

Author(s): John Teall

Publisher: Academic Press, Year: 2022

ISBN: 0323909558,9780323909556

Contents Preface xi Acknowledgments xiii 1. Introduction to Securities Trading and Markets 1.1 Trades, Traders, Securities, and Markets 1 1.2 Securities Trading 4 1.3 Bargaining 6 1.4 Auctions 7 1.5 Introduction to Market Microstructure 12 1.6 Orders, Liquidity and Depth 14 1.7 Day Trading 17 1.8 Trading and the Broader Economy 24 Additional Reading 29 References 29 1.9 Exercises 30 2. Securities Markets 2.1 Exchanges and Floor Markets 35 2.2 The Way It Was 36 2.3 Over-the-Counter Markets and Alternative Trading Systems 45 2.4 The Decline of Brick and Mortar 49 2.5 Crossing Networks and Upstairs Markets 53 2.6 Fixed-Income Securities and Money Markets 55 2.7 Markets Around the World 64 2.8 Currency Exchange and Markets 66 2.9 Cryptocurrency and Bitcoin Trading 72 2.10 Commodities and Futures 74 2.11 Swaps and Swap Execution Facilities 76 Additional Reading 79 References 79 2.12 Exercises 80 3. Financial Market Utilities and Securities Trading Support 3.1 Securities Trading Infrastructure 83 3.2 Price and Quotation Systems 84 3.3 Brokerage Operations 85 3.4 Clearing and Settlement 87 3.5 Other Financial Market Utilities and Functions 94 3.6 Systemically Important Financial Market Utilities 96 Additional Reading 98 References 98 3.7 Exercises 99 4. Institutional Trading 4.1 Institutions and Market Impact 101 4.2 Registered Investment Companies 102 4.3 Unregistered Investment Companies 106 4.4 Best Execution, Execution Costs, and Price Improvement 108 4.5 Algorithmic Trading 113 4.6 Dark Pools 115 4.7 Stealth and Sunshine Trading 117 4.8 High-Frequency Trading 118 4.9 Flash Trading and Sponsored Access 125 Additional Reading 128 References 128 4.10 Exercises 129 5. Regulation of Trading and Securities Markets 5.1 Regulatory Approaches and the Regulatory Balance 133 5.2 Pre-1930s Securities Regulation: The Background 136 vii 5.3 U.S. Securities Market Legislation: The Foundation 139 5.4 Crises and Updating the Regulatory System 142 5.5 Deregulation, Corporate Scandals, and the Financial Crisis of 2008 146 5.6 Dodd
Frank 149 5.7 Government Oversight of Self-Regulation 151 5.8 Impact of Regulatory Activity 155 5.9 Regulation: The International Arena 159 5.10 Privatization of Regulation and Exchange Rules 162 Additional Reading 165 References 165 5.11 Exercises 167 6. Adverse Selection, Trading, and Liquidity 6.1 Market Microstructure, Liquidity, and Spreads 169 6.2 Information and Trading 171 6.3 Noise Traders 172 6.4 Adverse Selection in Dealer Markets 173 6.5 Adverse Selection, Dealer Inventories, and the Spread 177 6.6 Risk, Risk Aversion and Dealer Spreads 180 Additional Reading 183 References 183 6.7 Exercises 184 6.A.1 The Kyle Adverse Selection Model 188 7. Random Walks, Risk, and Arbitrage 7.1 Market Efficiency and Random Walks 195 7.2 Risk 198 7.3 Arbitrage 204 7.4 Limits to Arbitrage 206 Additional Reading 209 References 209 7.5 Exercises 210 7.A.1 Return and Risk Spreadsheet Applications 215 7.A.2 A Primer on Black-Scholes Option Pricing 215 7.A.3 Estimating Implied Black-Scholes Variances 221 8. Arbitrage and Hedging With Fixed Income Instruments and Currencies 8.1 Arbitrage With Riskless Bonds 227 8.2 Fixed Income Hedging 229 8.3 Fixed Income Portfolio Immunization 233 8.4 Term Structure, Interest Rate Contracts, and Hedging 239 8.5 Arbitrage With Currencies 248 8.6 Arbitrage and Hedging With Currency Forward Contracts 250 8.7 Hedging Exchange Exposure 255 Additional Reading 257 References 257 8.8 Exercises 257 9. Arbitrage and Hedging With Options 9.1 Derivative Securities Markets and Hedging 261 9.2 Put
Call Parity 263 9.3 Options and Hedging in a Binomial Environment 264 9.4 The Greeks and Hedging in a Black-Scholes Environment 274 9.5 Exchange Options 282 9.6 Hedging Exchange Exposure With Currency Options 284 Additional Reading 285 References 286 9.7 Exercises 286 9.A.1 The Binomial Model: Additional Considerations 290 9.A.2 Deriving the Black-Scholes Model 293 10. Evaluating Trading Strategies and Performance 10.1 Evaluating Investment Portfolio Performance 297 10.2 Market Timing Versus Selection 303 10.3 Trade Evaluation and Volume-Weighted Average Price 306 10.4 Implementation Shortfall 309 10.5 Value at Risk 311 Additional Reading 315 References 315 10.6 Exercises 316 viii CONTENTS 11. The Mind of the Investor 11.1 Rational Investor Paradigms 321 11.2 Prospect Theory 325 11.3 Behavioral Finance 329 11.4 Body and Mind of the Trader 339 11.5 Neurofinance: Getting Into the Investor’s Head 344 11.6 The Consensus Opinion: Stupid Investors, Smart Markets? 346 Additional Reading 350 References 350 11.7 Exercises 354 12. Market Efficiency 12.1 Introduction to Market Efficiency 359 12.2 Weak Form Efficiency and Technical Analysis 360 12.3 Testing Momentum and Mean Reversion Strategies 370 12.4 Semistrong Form Efficiency 373 12.5 The Event Study Methodology 379 12.6 Strong Form Efficiency and Insider Trading 389 12.7 Anomalous Efficiency and Prediction Markets 391 12.8 Epilogue 394 Additional Reading 395 References 395 12.9 Exercises 399 13. Trading Gone Awry 13.1 The Dark Side of Finance 403 13.2 Illegal Insider Trading 404 13.3 Front Running and Late Trading 411 13.4 Bluffing and Market Manipulation 413 13.5 Payment for Order Flow 423 13.6 Fat Fingers, Hot Potatoes, and Technical Glitches 425 13.7 Rogue Trading and Rogue Traders 427 13.8 Hiding Trading Losses with Ponzi Schemes 432 Additional Reading 435 References 435 13.9 Exercises 437 Mathematics Appendix 439 End-of-Chapter Exercise Solutions 457 Glossary 519 Index 539

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