- 金融交易的本质是Asset Re-allocation
Financial Market Modelling
Stock market is a game market in which asset re-allocation happens everytime. It is interesting that stock market functions both as a place of capital investment and financial arbitrage. Initial share offering (IPO) pumps money into the market. Stock trading is an exchange between corporation and the investors. Stock trading between investors does not affect the balance sheet of the corporation.
"Money inside the market" refers to the overal valuation of the stocks in the market. It is the circulation of currency in the market. The circulation of currency happens together with the circulation of stocks.
There are many historial patterns of the market both in long-term and short-term, paired with economy patterns.
Asset valuation is a subjective, opinion based process substantially affected by human bias. Investor irrelationality is the basis of stock market arbitrage.
The flucation of stock prices is directly caused by trading orders, which is caused by the following two factors (independent of each other, but may function jointly to determine the bid/ask price):
1. The news of the corporation (fundamentals of the company)
2. The bid/ask of other market participant (the movement of other players)
Stock market has two functions, asset valuation and medium of exchange.
Unmatched ask price (monetary unit in currency in exchange of stock) is always higher than bid price, the difference between ask price and bid price is the bid-ask spread.
Supposedly, the bid-ask matching system will execute a trade when the price of sell order is equal or lower than a buy order. The execution price will be the price of the sell order, as it satisfies the monetary requirement for such trade, meanwhile potentionally saves money for the buyer.
The executation price will always be the ask price.
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fluid intelligence and crystallized intelligence
Order Book Matching Algorithm
Algorithmic Trading / Automated Trading