by Kumar Yashaswi
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Suggested foundations for financial time series and options and derivatives pricing. Specialist prerequisites vary by paper.
Check whether a relationship can be estimated consistently over time.
Read the fitted relationship and its residuals.
Build replication and risk-neutral probabilities in a tractable model.
Distinguish pricing probabilities from physical forecasts.
Study long-run relationships without confusing them with correlation.
Check the assumptions behind reported estimates.
Connect the pricing equation, closed-form value and implied volatility.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.