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Trades, Quotes and Prices

Trades, Quotes and Prices
Financial Markets Under the Microscope

$62.00 USD

  • Date Published: March 2018
  • availability: This ISBN is for an eBook version which is distributed on our behalf by a third party.
  • format: Adobe eBook Reader
  • isbn: 9781108639064

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About the Authors
  • The widespread availability of high-quality, high-frequency data has revolutionised the study of financial markets. By describing not only asset prices, but also market participants' actions and interactions, this wealth of information offers a new window into the inner workings of the financial ecosystem. In this original text, the authors discuss empirical facts of financial markets and introduce a wide range of models, from the micro-scale mechanics of individual order arrivals to the emergent, macro-scale issues of market stability. Throughout this journey, data is king. All discussions are firmly rooted in the empirical behaviour of real stocks, and all models are calibrated and evaluated using recent data from Nasdaq. By confronting theory with empirical facts, this book for practitioners, researchers and advanced students provides a fresh, new, and often surprising perspective on topics as diverse as optimal trading, price impact, the fragile nature of liquidity, and even the reasons why people trade at all.

    • Uses recent, high-quality, high-frequency data to illustrate all examples with real empirical results, which enables readers to see and judge all core results for themselves
    • Material is presented in an original way, using tools and notions from physics, mathematics and financial mathematics making the text accessible to a wide audience
    • A comprehensive overview of modern market microstructure, presented as a cohesive narrative that provides newcomers with a strong introduction to the many relevant topics involved in this discussion
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    Reviews & endorsements

    'Leading physicist and hedge fund manager Jean-Philippe Bouchaud and his co-authors have written an impressive book that no serious student of market microstructure can afford to be without. Simultaneously quantitative and highly readable, Trades, Quotes and Prices presents a complete picture of the topic, from classical microstructure models to the latest research, informed by years of practical trading experience.' Jim Gatheral, Baruch College, City University of New York

    'This book describes the dynamics of supply and demand in modern financial markets. It is a beautiful story, full of striking empirical regularities and elegant mathematics, illustrating how the tools of statistical physics can be used to explain financial exchange. This is a tour de force with the square root law of market impact as its climax. It shows how institutions shape human behaviour, leading to a universal law for the relationship between fluctuations in supply and demand and their impact on prices. I highly recommend this to anyone who wants to see how physics has benefited economics, or for that matter, to anyone who wants to see a stellar example of a theory grounded in data.' Doyne Farmer, University of Oxford

    'This is a masterful overview of the modern and rapidly developing field of market microstructure, from several of its creators. The emphasis is on simple models to explain real and important features of markets, rather than on sophisticated mathematics for its own sake. The style is narrative and illustrative, with extensive references to more detailed work. A unique feature of the book is its focus on high-frequency data to support the models presented. This book will be an essential resource for practitioners, academics, and regulators alike.' Robert Almgren, New York University and Quantitative Brokers

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    Product details

    • Date Published: March 2018
    • format: Adobe eBook Reader
    • isbn: 9781108639064
    • contains: 79 b/w illus. 7 tables
    • availability: This ISBN is for an eBook version which is distributed on our behalf by a third party.
  • Table of Contents

    Part I. How and Why Do Prices Move?:
    1. The ecology of financial markets
    2. The statistics of price changes: an informal primer
    Part II. Limit Order Books: Introduction:
    3. Limit order books
    4. Empirical properties of limit order books
    Part III. Limit Order Books: Models:
    5. Single-queue dynamics: simple models
    6. Single-queue dynamics for large-tick stocks
    7. Joint-queue dynamics for large-tick stocks
    8. The Santa Fe model for limit order books
    Part IV. Clustering and Correlations:
    9. Time clustering and Hawkes processes
    10. Long-range persistence of order flow
    Part V. Price Impact:
    11. The impact of market orders
    12. The impact of metaorders
    Part VI. Six Market Dynamics at the Micro-scale:
    13. The propagator model
    14. Generalised propagator models
    Part VII. Adverse Selection and Liquidity Provision:
    15. The Kyle model
    16. The determinants of the bid–ask spread
    17. The profitability of market making
    Part VIII. Market Dynamics at the Meso-scale:
    18. Latent liquidity and Walrasian auctions
    19. Impact dynamics in a continuous-time double auction
    20. The information content of prices
    Part IX. Practical Consequences:
    21. Optimal execution
    22. Market fairness and stability
    23. Appendices

  • Authors

    Jean-Philippe Bouchaud, Capital Fund Management, Paris
    Jean-Philippe Bouchaud is a pioneer in Econophysics. He co-founded the company Science and Finance in 1994, which later merged with Capital Fund Management (CFM) in 2000. In 2007 he was appointed as an adjunct Professor at École Polytechnique, where he teaches a course on complex systems. His work focuses on the physics of disordered and glassy systems, granular materials, the statistics of price formation, stock market fluctuations and the modelling of financial risks. He was awarded the Centre national de la recherche scientifique (CNRS) Silver Medal in 1995, the Risk Quant of the Year Award in 2017 and is the co-author along with Marc Potters of Theory of Financial Risk and Derivative Pricing (Cambridge,2009).

    Julius Bonart, University College London
    Julius Bonart is a lecturer at University College London where his research focuses on market microstructure and market design. Before, he was a research fellow at CFM and Imperial College of Science, Technology and Medicine, University of London where he investigated price impact, high-frequency dynamics, and the market microstructure in electronic financial markets. Julius Bonart obtained his Ph.D. in Statistical Physics from Pierre-et-Marie Curie University (Paris).

    Jonathan Donier, Capital Fund Management
    Jonathan Donier completed a Ph.D. at University Paris 6 with the support of the Capital Fund Management Research Foundation. He studied price formation in financial markets using tools from physics, economics and financial mathematics. After his Ph.D., he carried on his research in a music industry start-up that joined Spotify in 2017, where he now serves as a Senior Research Scientist.

    Martin Gould, CFM - Imperial Institute of Quantitative Finance
    Martin Gould currently works in the technology sector and was previously a James S. McDonnell Postdoctoral Fellow in the CFM-Imperial Institute of Quantitative Finance, which is part of the Department of Mathematics at Imperial College of Science, Technology and Medicine, University of Londo. Martin holds a D.Phil. (Ph.D.) in mathematics from the University of Oxford, Part III of the Mathematical Tripos from the University of Cambridge, and a B.Sc. (Hons) in mathematics from the University of Warwick.

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