Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.550767
Title: Essays on market liquidity
Author: Żurawski, Piotr Marcin
Awarding Body: London School of Economics and Political Science (LSE)
Current Institution: London School of Economics and Political Science (University of London)
Date of Award: 2011
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Abstract:
In the first chapter of my Thesis I propose a model of front-running in noisy market environment. I demonstrate that even if the front-runner/predator has no initial knowledge about the position of a distressed trader he will be still able to front-run his orders in a linear Bayesian-Nash equilibrium. This is possible because initial orders of the distressed trader tend to reveal his initial position. The contribution of this chapter is also in the analysis of long-term dynamics of predatory trading under Gaussian uncertainty. Second chapter treats about the dark-pools of liquidity which are highly popular systems that allow participants to enter unpriced orders to buy or sell securities. These orders are crossed at a specified time at a price derived from another market. I present an equilibrium model of coexistence of dark-pools of liquidity and the dealer market. Dealer market provides the immediate execution, whereas the dark-pool of liquidity provides lower cost of trading. Risk-averse agents in equilibrium optimally choose between safe dealer market and cheaper dark-pool of liquidity. In the third chapter I solve for a partial-equilibrium optimal consumption and investment problem, when one of the investment assets is traded infrequently. Opportunity to trade the "illiquid asset" arises upon the occurrence of a Poisson event. Only when such event occurs a trader is able to change (increase or decrease) her position in the illiquid asset. The investor can consume continuously from the bank account. After deriving HJB equation, I analyze in details the implications of illiquidity on the optimal level of consumption, allocation and welfare. The optimal policy is solved using algorithm from aeronautics.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.550767  DOI: Not available
Keywords: HC Economic History and Conditions
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