Modelling Trade-Based Manipulation Strategies in Limit-Order Markets

Insider trading (i.e., “informed market manipulation”) use private informa-tion to illegally profit. However, it is not necessary to have trading related information to profit in a stock market. If a trader can generate false infor-mation in order to mislead other market participants, he or she can make a profit. This is commonly termed “uninformed market manipulation.” Modelling stock markets provides a means to test market manipulation the-ories. This thesis presents such market models to describe different aspects of complex behaviour in stock markets and stock manipulation. This re-search is shown to be the first to characterise trade-based manipulation in a single realistic model of a limit order market. We discuss the characteristics of stock manipulation by considering trad-ing related information, and present a simple framework for manipulation. Realistic market micro-structure models are presented to characterise stock market and trader behaviour. A belief structure of a stock trader is char