Liquidity Suppliers and High Frequency Trading | Hanlon Financial Systems Center

Liquidity Suppliers and High Frequency Trading

Liquidity Suppliers and High Frequency Trading

seminar date: 
Wednesday, March 2, 2016 - 5:45pm
seminar location: 
Burchar 118
Philip Protter, Columbia University
Abstract: 

We will provide a mathematical analysis of how high frequency traders profit from their speed with respect to the limit order book. Their profits can be decomposed into two components: The first is due to their ability to execute market orders at limit order prices and without incurring any liquidity costs themselves. The second is by "front running" market orders with limit prices. These trading profits are at the expense of ordinary traders who submit market orders and sophisticated traders who submit limit orders or who use algorithmic trading to split up and execute large trades.

 

Bio: 

Professor Protter's primary research interests include mathematical finance (capital asset pricing theory, the pricing and hedging of derivatives, liquidity issues, financial bubbles, insider trading, high frequency trading, and credit risk), stochastic integration theory, stochastic differential equation theory, numerical solutions of stochastic differential equations, discretization of stochastic processes (as a branch of mathematical statistics), backward and forward-backwards stochastic differential equations, Markov process theory, and filtering theory. He has authored or co-authored two textbooks and two research books.

Professor Protter is a Fellow of the I.M.S., a Fellow of the A.A.A.S., and the Associate Editor of several research journals and is on two editorial boards, and is the former editor-in-chief of Stochastic Processes and their Applications. In 2007 he was a Fulbright Distinguished Chair at the University of Paris (Dauphine), and he has given many invited special lectures, including the R. Von Mises Lecture, Humboldt Universitat, Germany (Inaugural Lecture), June 7, 2007; the Bullitt Lecture, University of Louisville, KY, April 3, 2008; and Lundis de la Connaissance, Nice, France, July 6, 2009. He has been a visiting member of the Institute for Advanced Study, and he has been an invited visitor at many universities in the US and abroad. He has won two "best teacher" awards.

Professor Protter was an Assistant Professor at Duke University, a visiting member of the IAS in Princeton, a Professor at Purdue University, and a Professor at Cornell University before moving to Columbia University in 2011. He has been an invited short term visitor at the University of Wisconsin, the University of Paris, INRIA, and the Universities of Nice, Provence, Rennes, Rouen, Strasbourg, Marne-la-Vallee, and Nancy in France; Perugia, Rome, and l'Aquila in Italy; the University of Bonn and Humboldt University in Germany, ETH in Zurich, the University of Warwick in England, and the University of Tokyo. He has also given short courses in Chile, Finland, Milan, New York, and Istanbul.