by Bruno Durin, Grégoire Szymanski, Mathieu Rosenbaum
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Suggested foundations for stochastic processes and pricing and market microstructure and execution. Specialist prerequisites vary by paper.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Read bid, ask, depth and queue-based market state.
Understand why fills and order flow can carry information.
Connect stochastic dynamics to no-arbitrage prices.
Translate continuous dynamics into a numerical experiment.
Connect trading speed and size to execution cost.
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.