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Price Destabilizing Speculation: The Role of Strategic Limit Orders

Speaker: Dr Suman Banerjee

CQF Institute is proud to bring you a free online society meeting with Dr Suman Banerjee on price destabilizing.

Event Agenda 

17:30 - 18:00 IST - Networking and CQF Booth 

18:00 - 19:30 IST - CQF Institute Delhi Society Meeting - Price Destabilizing Speculation: The Role of Strategic Limit Orders

19:30 - 20:00 IST - Networking and CQF Booth 

This event can earn you upto 2 CPD credits.

Abstract

We show that under quantity competition with only a few strategic sellers, a large speculator with access to storage facilities can destabilize prices and profit from it. Through clever use of a combination of limit and market orders, the speculator lowers the price while buying and raises the price while selling. This creates price volatility even though there is no fundamental uncertainty in the economy and all market participants act rationally. When the speculator can freely dispose of parts of his acquired inventory, the speculator trades using a combination of limit, market, and stop-loss order, and the resulting market price is even more volatile.  We show that if the number of strategic sellers is large the consumers are worse-off in aggregate welfare terms.

Speaker's Bio

Dr. Suman Banerjee is an Associate Professor of Finance and the director of Ph.D. programs at the School of Business of the Stevens Institute of Technology. His research interests include theoretical modeling and empirical analysis with applications to areas of corporate finance such as corporate governance, behavioral corporate finance, risk management, and energy finance. Dr. Banerjee has published extensively in top-tier finance journals like Review of Financial Studies (RFS), Journal of Financial Economics (JFE), Journal of Finance and Quantitative Analysis (JFQA), Journal of Corporate Finance (JCF). Dr. Banerjee also published in top-ranked cross-disciplinary journals like Management Science (MS) and Journal of Business (JB). Dr. Banerjee received the Caeserea Award for the best paper in risk management from the prestigious Western Finance Association in 2002 and BankScope best paper award from the Australian Finance and Banking Conference in 2010. He was honored as a Junior Research Fellow by the Indian University Grants’ Commission and Center for Advanced Studies Scholarship while pursuing a master’s degree. He has obtained several other merit-based awards in the course of his academic career. Dr. Banerjee is a lifetime member of the multiple finance-related national and international associations and the editor-in-chief of an open-access finance journal. He is also a knowledge-based consultant for Bloomberg Inc., Dhoonicorn International, and RiskLimited Corporation.