by Isao Yagi, Ryuki Hayase, Takanobu Mizuta
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Suggested foundations for options and derivatives pricing and market microstructure and execution. Specialist prerequisites vary by paper.
Build replication and risk-neutral probabilities in a tractable model.
Distinguish pricing probabilities from physical forecasts.
Read bid, ask, depth and queue-based market state.
Understand why fills and order flow can carry information.
Connect the pricing equation, closed-form value and implied volatility.
Connect trading speed and size to execution cost.
Measure execution relative to the decision price.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.
Learn the trading state and execution trade-off before evaluating reinforcement-learning market makers.