by Jeremy C. Stein, Malcolm Baker
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Suggested foundations for text and language models in finance and market microstructure and execution. Specialist prerequisites vary by paper.
Understand how text is converted into numerical inputs.
Check whether labels measure the financial construct of interest.
Read bid, ask, depth and queue-based market state.
Understand why fills and order flow can carry information.
Test whether a text-derived signal survives an honest financial evaluation.
Measure agreement when constructing or checking labels.
Connect trading speed and size to execution cost.
Learn the trading state and execution trade-off before evaluating reinforcement-learning market makers.