Finance — Study Guide
Two tracks, designed for 15–20 minute focused reading sessions. Track A is the main path — TradFi fundamentals first, then DeFi, then the connections between them. Track B is a deep dive into market microstructure models (academic/interview prep). Read Track B after finishing Track A Phase 1b, or interleave it.
Track A — Main Path (22 steps, 6 phases)
Phase 1a: Market Fundamentals (Steps 1–2)
These two notes establish what markets are and how trades settle. If you’ve worked in finance you can skim, but don’t skip — the settlement note covers CCP mechanics, DvP, and CLS Bank.
Step 1 — Market Fundamentals
| Note | market-fundamentals |
| Time | ~15 min |
Focus on: What a market actually does (price discovery, risk transfer, capital allocation). The four asset classes and what makes each distinct. Buy-side vs sell-side. Why exchanges and clearinghouses exist.
You’re ready for Step 2 when: you can name the five types of market participants and explain what each one does.
Step 2 — Settlement and Clearing
| Note | settlement-and-clearing |
| Time | ~15 min |
Focus on: The trade lifecycle (execution → clearing → settlement). T+1/T+2 timing. DvP (Delivery vs Payment). CCP role (novation, netting). Pay attention to CLS Bank (PvP for FX) and the atomic settlement comparison.
You’re ready for Phase 1b when: you can explain why traditional settlement takes a day and what risks the CCP absorbs.
Phase 1b: Market Structure (Steps 3–6)
Now we get into how trading actually works: spreads, volatility, order books, and adverse selection. This is the intellectual foundation for everything that follows.
Step 3 — Trading Fundamentals
| Note | trading-fundamentals |
| Time | ~20 min |
Focus on: The bid-ask spread as compensation for adverse selection. Maker vs taker. Market maker P&L. Historical context — from floor specialists to electronic market makers.
You’re ready for Step 4 when: you can explain why market makers charge a spread and what adverse selection means.
Step 4 — Volatility
| Note | volatility |
| Notebook | notebook |
| Time | ~20 min |
Focus on: Realized vol: how to compute it from prices (the notebook walks through this). Implied vol: what it is and why it’s usually higher than realized. The volatility reference table — know whether 60% is high or low. Volatility clustering.
You’re ready for Step 5 when: you can compute realized vol from a price series and explain why implied > realized on average.
Step 5 — Order Books
| Note | order-books |
| Notebook | notebook |
| Time | ~20 min |
Focus on: CLOB structure (two priority queues). Price-time priority. Order types (limit, market, and the execution-policy wrappers). Quoted vs effective spread — why large orders cost more. Depth and resilience.
You’re ready for Step 6 when: you can explain why a 10,000-share market order pays a worse average price than a 100-share order.
Step 6 — Glosten-Milgrom Model
| Note | glosten-milgrom-model |
| Time | ~20 min |
Focus on: The formal model of how adverse selection determines the spread. The parameter (fraction of informed traders). Why the spread widens as information asymmetry increases. This is the theoretical backbone that explains why market makers charge for providing liquidity.
You’re ready for Phase 2 when: you can explain in one sentence why a market maker facing more informed traders quotes a wider spread.
Phase 2: Options (Steps 7–8)
These two notes explain calls, puts, straddles, and the Greeks — the language used to describe and manage option risk. Essential for understanding derivatives pricing and volatility trading.
Step 7 — Options Basics
| Note | options-basics |
| Notebook | notebook |
| Time | ~15 min |
Focus on: What calls and puts are. The payoff diagrams (hockey sticks). Buying vs selling. What a straddle is and why it matters for volatility trading.
You’re ready for Step 8 when: you can explain why a short straddle profits when the price stays near the strike.
Step 8 — The Greeks
| Note | the-greeks |
| Notebook | notebook |
| Time | ~20 min |
Focus on: Delta (sensitivity to price). Gamma (sensitivity of delta — the curvature). The gamma P&L formula: . Why short gamma means losses accelerate with price moves.
Skip on first pass: theta, vega, rho. Come back to them later.
You’re ready for Phase 3 when: you can explain what “short gamma” means and why it creates quadratic losses from price moves.
Phase 3: DeFi Mechanics (Steps 9–11)
The core DeFi math: AMMs, bonding curves, and impermanent loss.
Step 9 — Constant-Product AMM
| Note | constant-product-amm |
| Notebook | notebook |
| Time | ~20 min (skim if familiar) |
Focus on: The invariant. Why the price is . Price impact: why large trades cost more. The fee mechanism: is deducted before the invariant applies.
You’re ready for Step 10 when: you can explain why buying 10% of a pool’s tokens costs more per token than buying 1%.
Step 10 — Bonding Curves
| Note | bonding-curves |
| Notebook | notebook |
| Time | ~20 min |
Focus on: How bonding curves differ from AMMs (primary vs secondary market). The Pump.fun lifecycle: bonding curve → graduation → AMM. Virtual reserves. Play with the curve shapes in the notebook.
You’re ready for Step 11 when: you can explain why the first buyer on a bonding curve pays less than the hundredth.
Step 11 — Impermanent Loss
| Note | impermanent-loss |
| Notebook | notebook |
| Time | ~20 min |
Focus on: The $172 gap intuition example. The IL formula: . The reference table: gives -5.72%, same as . Symmetry in log-price. The “why can’t the contract avoid IL?” section.
Skip on first pass: the sech representation and Taylor expansion. Come back after Step 13.
You’re ready for Step 12 when: you can explain IL as “the pool auto-sells your winners and buys your losers.”
Phase 4: LP Economics (Steps 12–13)
Step 12 — LP Profitability
| Note | lp-profitability |
| Notebook | notebook |
| Time | ~20 min |
Focus on: Fee APR = . The break-even formula: . The profitability heatmap in the notebook. The market- maker analogy table.
You’re ready for Step 13 when: you can look at a pool’s fee rate, volume, TVL, and volatility and estimate whether LPs are profitable.
Step 13 — The LP as Short Volatility
| Note | lp-as-short-vol |
| Time | ~15 min |
Focus on: This is the capstone connecting options and DeFi. The IL↔σ² connection. Break-even vol = the LP’s implied volatility. The comparison table. Where the straddle analogy breaks (tails: straddle linear, LP bounded).
You’re ready for Phase 5 when: you understand “LPs are short vol” as a precise quantitative statement.
Phase 5: MEV (Steps 14–16)
Step 14 — Blockchain Transaction Lifecycle
| Note | blockchain-transaction-lifecycle |
| Time | ~15 min |
Focus on: The mempool (public waiting room). Block producer ordering power. Why pending transactions being visible creates MEV. Ethereum vs Solana comparison.
Step 15 — MEV Fundamentals
| Note | mev-fundamentals |
| Time | ~20 min |
Focus on: MEV taxonomy (arbitrage, liquidation, sandwich, JIT, backrunning). The MEV supply chain (searchers → builders → validators). The sandwich bot pseudocode — read it line by line.
Step 16 — Sandwich Attacks
| Note | sandwich-attacks |
| Time | ~15 min |
Focus on: The 4-step mechanics. The formal math. The Pump.fun vulnerability analysis.
Phase 6: Market Structure in Practice (Steps 17–22)
These notes take the theory from Phases 1–5 and show how it plays out in real markets: venue taxonomy, trade types, retail access, IPOs, and why regulators made different choices.
Step 17 — Trading Venues
| Note | trading-venues |
| Time | ~15 min |
Dark pools, RFQ, and the venue landscape tables (TradFi, crypto, on-chain). The US ↔ EU venue mapping table. Can be read any time after Step 5.
You’re ready for Step 18 when: you can explain the difference between an ATS and an exchange, and why “dark pool” is a mode, not a category.
Step 18 — Trade Types and Order Flow
| Note | trade-types |
| Time | ~20 min |
Agency vs principal execution, block trades and the upstairs market, algorithmic execution (VWAP, TWAP, Implementation Shortfall as benchmarks and algorithms), and the retail PFOF pipeline.
You’re ready for Step 19 when: you can explain why VWAP is first a benchmark and second an algorithm, and what a riskless principal trade is.
Step 19 — How Retail Investors Access Markets
| Note | retail-trading-access |
| Time | ~25 min |
How the plumbing changes when retail buys Treasuries, corporate bonds, spot FX, listed options, and ETFs. The three-layer framework (access interface → execution venue → intermediation chain) applied to each asset class. The cross-asset comparison table at the end is the payoff.
You’re ready for Step 20 when: you can explain why corporate bonds are the most expensive asset class for retail and why spot FX has the worst structural conflict of interest.
Step 20 — Why US and EU Venue Taxonomies Diverge
| Note | venue-taxonomy-divergence |
| Time | ~20 min |
Why the US has 2 venue categories and the EU has 4. Path dependence: the US solved a monopoly problem with architecture (NMS linkage), the EU solved a fragmentation problem with category creation (MiFID I/II). The political economy of who shaped each system.
You’re ready for Step 21 when: you can explain why the MTF and OTF are separate categories and what problem each solves.
Step 21 — The IPO Process
| Note | ipo-process |
| Time | ~20 min |
How a company goes public: S-1 filing, the roadshow, book building, pricing, stabilization, and the greenshoe mechanism. Also covers direct listings, SPACs, and the JOBS Act.
You’re ready for Step 22 when: you can explain book building and why the greenshoe option helps stabilize the post-IPO price.
Step 22 — The Pump.fun Economy (Capstone)
| Note | pump-fun-economy |
| Time | ~20 min |
Everything from Phases 1–6 feeds into this note. It maps each participant to a microstructure role and shows the negative-sum flow of funds. Read it last — it should click now.
Track B — Market Microstructure Deep Dive
Prerequisite: Track A through Phase 1b (Steps 1–6).
Academic models and interview-prep material. Longer, more mathematical sessions. Can be interleaved with Track A or read as a block after it.
B1 — Kyle’s Lambda
| Note | kyle-lambda |
| Time | ~20 min |
Kyle’s 1985 model. Price impact, informed trading intensity, the parameter. Why order flow is information.
B2 — Ho-Stoll Inventory Model
| Note | ho-stoll-inventory-model |
| Time | ~20 min |
The inventory-based spread model. Risk-averse market maker, optimal quotes, inventory drift.
B3 — Spread Decomposition
| Note | spread-decomposition |
| Time | ~15 min |
Huang-Stoll decomposition of the spread into adverse selection, inventory, and order processing components.
B4 — Matching Engine System Design
| Note | matching-engine-system-design |
| Notebook | notebook |
| Time | ~45 min |
The system design interview walkthrough. Architecture, data structures, sequencing, fault tolerance. Longer session by design.
B5 — Almgren-Chriss (future)
Optimal execution under market impact.
B6 — Maker-Taker Economics (future)
Fee models, rebate structures, incentive design.
Quick Reference
- glossary — alphabetical index of every acronym, technical term, and named model defined in the vault. Use it when you hit an unfamiliar term mid-note.
Tips
- Read the note first, then open the notebook. The note gives you the concepts; the notebook lets you play with them.
- Don’t skip the intuition sections. Every math-heavy note starts with a plain-English section. If that section doesn’t click, re-read it before moving to the math.
- Use the sliders. The notebooks are interactive for a reason. The break-even calculator in LP profitability is worth 10 minutes of slider-dragging to build intuition.
- It’s OK to skip math on first pass. The derivations are there for depth. The intuition sections and notebooks carry the core ideas.
- Track A first, Track B when ready. Track B is academic — it gives you the models but assumes you already know the vocabulary from Track A Phase 1b.