Trade Frictions in Decentralised Markets: An Experimental Study

Seminar abstract

The aim of this paper is to examine the effects of market opacity and trade frictions, on market efficiency and social welfare in exchanges organised by centralised trade and intermediation. 

Networks are natural tools to represent the trading relationship among market participants in decentralised markets.

By constraining matching on exogenously predetermined networks and without altering the price formation mechanisms, which based on the bilateral trade limit order book technology, we compare and interpolate between highly decentralised and fully connected double auction markets.

Via laboratory experiments with human subjects we investigate

• how the structure of the trading network affects the market reaction to public information,
• the way asymmetric private information is aggregated into prices,
• the manner in which the price negotiated on a particular trade reflects the relative degree of connectedness of the buyer and seller,
• extent to which location advantages create heterogeneity in gains from trading among traders.

Booking

This is a open event. Please feel free to bring your colleagues, friends and classmates along.

Speaker bio

Professor Giulia Iori obtained her PhD in Physics from the University of Rome in 1993. After this she held postdoctoral positions at a number of universities in the USA and Europe, in 1998 she joined the University of Essex as Lecturer in Finance. In 2000 she moved to King's College London as a Lecturer and then a Reader in Financial Mathematics.

She has joined City, University of London, as Professor in Economics in 2005 and she is currently the Head of Economics Department.

Giulia has been a leading contributor to the development of the an approach to complexity in financial markets and economic network derived from the tools of statistical mechanics and has been a pioneer in applying Agent Based Models to Economics.

Her research, in the area of Financial Economics and Financial Mathematics, has been funded by;

• British Academy,
• European Commission 
• EPSRC.

She was also awarded the Lamfalussy Fellowship from the European Central Bank in 2003.

Professor Giulia Iori is Co-Editor of the Journal of Economic Interaction and Coordination an Associate Editor of the Journal of Economics Dynamics and Control.

She serves on the ESRC Grant Assessment Panels and is a member of the London Mathematics Society as well as being a Chartered Physicist.