The course starts with institutional background and market microstructure basics, in particular market types (dealer or limit order book markets), order types and market participants. It moves on to the main theoretical models of price formation (Roll model, Kyle model, Glosten model, and others). The course then covers structural models of the trading process (Huang/Stoll, Glosten/Harris, Madhavan/Richardson/Roomans model). Finally, insight is given into recent developments in the analysis of high frequency financial data (such as realized volatility, microstructure noise, algorithmic trading).
The theoretical aspects are illustrated in empirical applications using SAS.