by Hao Wang, Thibaut Mastrolia
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Suggested foundations for market microstructure and execution and stochastic processes and pricing. Specialist prerequisites vary by paper.
Read bid, ask, depth and queue-based market state.
Understand why fills and order flow can carry information.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Connect trading speed and size to execution cost.
Measure execution relative to the decision price.
Connect stochastic dynamics to no-arbitrage prices.
Learn the trading state and execution trade-off before evaluating reinforcement-learning market makers.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.