by Lingjiong Zhu, Xin Guo, Zhao Ruan
Continue on SelfMadeQuant
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.