FINAL PROJECT
SEMINAR IN FINANCE
Submitted By
Moeed Khan 14402
Qalab Abbas Shah 13189
Stephany Julius 14408
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Market Microstructure is a branch of finance concerned with the details of how
exchange occurs in markets. While the theory of market microstructure applies to
the exchange of real or financial assets, more evidence is available on the
microstructure of financial markets due to the availability of transactions data
from them. The major thrust of market microstructure research examines the
ways in which the working processes of a market affect determinants of
transaction costs, prices, quotes, volume, and trading behavior. In the twenty-first
century, innovations have allowed an expansion into the study of the impact of
market microstructure on the incidence of market abuse, such as insider trading,
market manipulation and broker-client conflict. The study of the process and
outcomes of exchanging assets under explicit trading rules. While much of
economics abstracts from the mechanics of trading, microstructure literature
analyzes how specific trading mechanisms affect the price formation process.
The Market Model
The market model says that the return on a security depends on the return on the
market portfolio and the extent of the security's responsiveness as measured by
beta. The return also depends on conditions that are unique to the firm. The
market model can be graphed as a line fitted to a plot of asset returns against
returns on the market portfolio. This relationship is sometimes called the single-
index model. The relationship between a security's performance and the
performance of a portfolio containing it. The market model states that the
security's performance is related its portfolio's performance according to its beta
that is, if a security has a beta of 2, and the portfolio rises 10%, then that
particular security generally rises 20%.
Importance of Financial Modeling
Financial Modeling is the main core element to take the major business decisions
in a corporate world. Financial models are the most valuable tools for executing
business choices to get perfect solutions. A model can advise you regarding the
grade of risk associated with implementing certain decisions. They can also be
utilized to devise an effective financial statement that reflects the finances and
operations of company. These models help online internet businesses take quick
decisions more confidently.
Uses of Financial Modeling
In the finance industry, the value of financial modeling is increasing rapidly.
Financial modeling acts as an important tool which enables business ideas and
risks to be estimated in a cost-effective way. Financial modeling is an action of
creating attractive representation of a financial situation of company. Financial
Models are mathematical terms aimed at representing the economic
performance of a business entity.
Financial Modeling are widely used in Various Sectors
Investment Banks
Credit Rating Agencies
Equity Research
Mutual Funds
Financial KPOs
Project Finance companies.
What are the basic requirements for trading?
Many sales professionals don't have the marketing support to rely on a steady
flow of inbound leads, but still have to hit their quotas. Luckily, the inbound sales
methodology provides many ways to fill that need. Here are a few ways you can
start generating inbound leads on your own.
Inbound sales are a way to identify and connect with prospects by leveraging the
inbound mindset of building relationships way before someone is ready to buy.
Most successful salespeople already practice some version of solution selling.
They know sales is about consulting around the prospect's problems, not closing
the deal. It's about letting the prospect define the pace of the process and
offering education and advice as a way to build confidence and trust. This makes
it easy and safe for a client to buy. Here are a few ways you can make it scalable
and efficient on your own.
How to Generate Leads
Use social media to find prospects you can help.
Post a blog article on LinkedIn with an offer for a 15-minute consultation.
Get referrals from current customers.
Work with your personal network.
Attend a networking event
Revisit closed/lost opportunities.
Implement an email sequence.
Write for a blog.
Use social media to find prospects you can help.
Most salespeople are on LinkedIn, but may not be using it effectively for
generating top-of-the-funnel activity. It is a salesperson's dream to be able to
connect in a high-value, low-effort way to find interested prospects, and social
media is a great way to do so. A few quick recommendations to make sure your
LinkedIn Profile looks professional Try to connect with as many people as you can.
Extra credit if you can broaden your professional brand to Facebook for Business,
Twitter and Snapchat, although this does increase the amount of work involved.
Get referrals from current customers.
In the course of my work helping digital agencies fill their sales funnel, I
frequently ask my clients the last time they pinged their current clients, thanked
them for their business, and asked for help in generating more business. Everyone
agrees that referrals are effective, but for some reason, it's hard to implement it
effectively.
Work with your personal network.
Working your personal network is another sometimes-overlooked option that is
fairly easy to get started with because you have built-in trust. There are certain
people you'll meet in a personal context that you wouldn't think of as a lead
generation machine but can be incredibly valuable.
Attend a networking event.
Attending the events should be part of your routine because they're a great way
to grow your reach and potentially drum up business
Revisit closed/lost opportunities.
These are businesses that already know what your company does. They might
have seen a product demo or made it through a discovery call and it just wasn't
the right time to buy.
Touch base with these prospects every six months. Ask how their priorities have
changed, if their business and team goals have shifted, and what their challenges
are.
Invest in marketing to these prospects, because they're already more qualified
than new, warm leads. Enroll them in appropriate marketing email drips, send
them relevant blog posts, and keep communication personalized.
It might not be the right moment the first or third time you follow up, but it could
work in your favor the fifth.
And you never know when a prospect will change jobs and finally have the budget
or business case to implement your solution. By staying top of mind, you'll be the
first vendor they call.
7. Implement an email sequence.
At SaaStr Annual 2018, Sam Blond, CRO of Rainforest QA recommended, "Define
your strategy for outreach. Then get creative with the email copy -- be clever."
Blond explained that one of Rainforest's most successful email sequences is
addressed from their CTO. Rainforest's SDRs send the email to the CTO of a
prospect's company, framing the message as if their CTO asked them to reach
out.
"It's creative, it grabs attention, and it allows us to cast a wide net over each
prospect's company," Blond said.
To send a successful email sequence, have a clear purpose for each one. For
example:
Email 1: Address pain points
Email 2: Explain a value message
Email 3: Name drop a big client
Email 4: Qualify your message
Email 5: Include a product message
Email 6: Reach out one last time
Implement a comprehensive, purposeful email sequence and see it work for you.
8. Write for a blog.
Are you writing blogs yet? You should be. Start by writing about what you're an
expert in.
It could be sales process optimization, referral marketing, or your product/service
-- but whatever you do, start writing, and share it on your company's blog, your
personal social media channels, and your customers.
In 2018, it's important for you to be a visible expert in your field. Not only will it
display your expertise, but you'll educate your prospects as well. Need some help
on your first post? Reach out to your resident marketer or blog editor for a quick
lesson. They might even offer to help you write a post or two.
Don't like your leads? Get out and generate new ones. Try these tactics and close
more business this quarter. Looking for more ways to generate leads? Check out
these social selling techniques next.
Classic Economy or Models
Monthly sales forecasts for up to ten different product/service categories, which
can be defined by the user.
For each product/service category, users can enter specific sales projections (2
methods), specific revenue shares, as well as cost of materials/goods (3 methods),
input/output tax rates, inventory levels and specific receivable/payable
(debtor/creditor) terms.
Planning of direct/variable costs: includes direct labor head count and three other
user-definable direct cost categories (with 12 nameable sublines)
Overhead expenses (indirect costs): Five different categories with 30 user-
definable sublines
Payment terms can be individually set for each single cost item/variable
Capital expenditure and fixed assets with provision for handling depreciation,
additions/disposals, company produced additions (capitalized assets), and finance
leases.
EFM can handle three categories of fixed assets (intangibles, tangibles and
financial assets). Within each category multiple assets can be planned, with
individual input tax rates (if applicable).
Working capital and cash conversion cycle: Automatic calculation of net working
capital and corresponding KPIs like e.g. days sales outstanding, days payable
outstanding, and days inventory held (incl. graph)
Static order placement in limited order Market
In the last few years, almost all major stock exchanges have introduced electronic
limit order books, which collect incoming limit orders and automatically match
market orders against the best available limit order. The introduction of limit
order books has significantly changed trading strategies as the speed of trading
increased dramatically and traders have the choice between different order types.
This automatically raises the question which order type should be used under
which circumstances, and more generally, if and how optimal trading strategies
can be found. While some of these questions have been considered in the
economic and econometric literature, a rigorous mathematical treatment of is
often still lacking. In this thesis we develop suitable mathematical frameworks
and find appropriate mathematical tools to address these questions. In the first
part, we propose a mathematical model for a dynamic, continuous time limit
order book. Within this model, we study how the current state of the order book
determines its short-time evolution. In particular, we analyse the distribution of
the time-to-fill of a limit order. Since automated microtraders have to place
orders within milliseconds, we also propose approximate formulae for the Laplace
transform and the moments of the time-to-fill that can be computed very
efficiently. Finally, we test the model with real-world high-frequency order book
data and show that important properties are well reproduced by the model. In
the second part of this thesis, we analyse optimal trading strategies in limit order
books. We first remain in the setting of the model of part I, and compute optimal
liquidation strategies when the trader is restricted to use only market orders.
Next, we compute optimal liquidation strategies with both market and limit
orders in a simplified order book model. Finally, we turn to the problem of buying
a single share. The trader places a limit order at the beginning of the trading
period. The question is to find the optimal time when the limit order should be
converted to a market order if it has not been filled yet. We show how this time
depends on the spread, i.e. the additional price that is charged when converting
the limit to a market order.
Market Design & competition between Markets
Market Structure and Competition
Introduction
As explained in the Overview, basic problems addressed by regulation include the
control of market power and an asymmetry between the government and the
operator with respect to objectives and information. It is also noted that there are
three basic approaches to dealing with these problems, (a) subjecting the
operator to competitive pressures, (b) gathering information on the operator and
the market, and (c) applying incentive regulation.1 Regulators typically use some
combination of these three approaches and the proper mix depends on the
country’s needs and objectives, institutional capabilities and arrangements, cost
of obtaining information, and potential for competition.
This chapter examines issues of subjecting the operator to competitive pressure.
Competition is useful because it reveals actual customer demand and induces the
operator to provide service quality levels and price levels that customers want,
subject to the operator’s financial need to cover its costs. In other words,
competition can align the operator’s interests with the customers’ interests and
can cause the operator to reveal his true costs and other private information.
The remainder of this chapter is organized as follows. Monopoly and market
power are examined first, explaining factors that give rise to monopoly and
market power, and the effects of these market structures. Market structure refers
to the number of firms involved in supplying a market and the relationships
among those firms. Competition in the market, which is the traditional view of
competition, is covered next. Facilitating competition, structuring a utility industry
for competition, assessing market competition, and issues of competition for the
market are then reviewed. Competition for the market is an approach used when
it is impractical or inefficient to have more than one operator serve a market.
Issues examined include auctions, bidding, and contracting. Chapter IV considers
competition between markets. Following this chapter’s narrative is a list of
references that is organized by topic.
