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Financial Markets and Trading: An Introduction to Market Microstructure and Trading Strategies by Anatoly B. Schmidt

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Notes

CHAPTER 1 Financial Markets: Traders, Orders, and Systems

1. Obviously, these profits are not guaranteed (see below).

2. See Hull (2006) for a definitive description of the options theory and its applications.

3. Harris (2002) combines informed traders and technical traders into the same group of speculators, which seems to be at odds with contrasting speculators and informed value investors (see, e.g., Graham & Dodd 2008).

4. Harris (2002, 297) suggests that uninformed traders should minimize their trading in order to avoid losses. One can debate, however, the meaning of informed trader beyond being an insider.

5. This term should not be confused with the pricing the financial instruments called derivatives (see, e.g., Hull 2002).

6. The following notation, 100@10.25, is used to indicate that the order size is 100 and the price of one unit is $10.25.

CHAPTER 2 Modern Financial Markets

1. There were several other regional exchanges in the past. However, the financial market landscape has been dramatically changed in recent years due to mergers and acquisitions. In particular, Boston and Philadelphia regional exchanges were acquired by NASDAQ in 2007, and one of the primary markets, the American Stock Exchange, was acquired by NYSE Euronext in 2008.

2. The closing process is actually more complicated than the classical auction (Hasbrouck 2007).

3. Currently, the NYSE electronic market is named NYSE Arca.

4. The Instinet's agency brokerage was spun out into a separate business ...

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