Cameron's Blog - Switzerland: Day 1

Switzerland: Day 1

A picture of Lugano from some balcony somewhere.

Today was the first day of the market microstructure summer school, where Albert Menkveld and Thierry Foucault teach the theory and empirics of market microstructure. It’s held in Lugano, Switzerland, a large city in the Italian-speaking canton of Ticino.

Thierry began the week with theory1, primarily on determinants of the bid-ask spread, as well as how asymmetric information is applied in many of the classic models. Much of the conversation was based on a simplified model of Biais, Foucault, and Moinas (2015).

Biais, Bruno, Thierry Foucault, and Sophie Moinas, 2015, Equilibrium fast trading, Journal of Financial Economics 116, 292–313.

The model is largely a way of examining how exactly it is that informed trades impact the spread by examining the paremeterizations that define a market. The comparative statics suggest that spreads are increasing in the

  1. Proportion of fast traders (informed)
  2. Degree of market fragmentation
  3. Private valuation volatility

So far it’s been pleasant. Looking forward to tomorrow’s lecture.


  1. I am often made fun of for saying the phrase “theory models”. I recognize this is probably not right, but there has been so much mockery that I must now stick to my terminology. [return]