Trades, Quotes and Prices: Financial Markets Under the Microscope

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A terrific book written by academics steeped in practice that describes how the real-time activity at the micro-level of financial markets shapes outcomes at higher levels. Given how much attention is paid to asset prices, it is quite useful to shed an empirical, data-driven light on the market dynamics that produce the fluctuations we observe. Key message is that current prices are fleeting given how impactful subsequent transactions will be.

I found the section on the Sante Fe model for managing LOBs particularly interesting.

My congratulations to Jean-Philippe Bouchaud and his co-authors for a wonderful and authoritative work on market structure and trading. I am especially impressed by the application of models in physics to understand the dynamics of financial markets. I look forward to a second edition that also covers fixed income and exchange-traded funds; both are growing in importance and have their own unique features that require new models and paradigms. Well done on an essential read for practitioners and academics!

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