2026-04-14-finance-study-path-restructure-design

Finance Study Path Restructure — Design

Date: 2026-04-14 Status: Approved via brainstorming session

Problem

The Finance learning path has several issues:

1. Notes are too long for 15-20 minute focused reading sessions.
2. Reading order is wrong — DeFi concepts come before TradFi fundamentals, so the reader learns AMMs before understanding what an order book is.
3. No settlement or market fundamentals — the path assumes the reader knows what markets are, how trades settle, and who the participants are.
4. Monolith notes — options-payoffs.md combines basics + Greeks, volatility.md combines concept + LP connection, order-books-and-venues.md combines data structures + institutional design.
5. ASCII art diagrams — several notes (especially matching-engine-system-design.md and options-payoffs.md) use ASCII art instead of proper SVGs.
6. No second track for deep market microstructure content (Kyle, Ho-Stoll, spread decomposition) — these exist but aren’t organized into a coherent reading path.

Design

Two-Track Structure

Track A — Main Path (18 steps, 6 phases) The primary learning sequence. Each step is a 15-20 minute focused read. TradFi fundamentals first, then DeFi, then the connections between them.

Track B — Market Microstructure Deep Dive Academic models and interview-prep material. Can be read after Track A Phase 1b, or interleaved. Longer, more mathematical sessions.

Track A: Main Path

Phase 1a: Market Fundamentals (2 steps)

Step	Note	Status	Covers
1	market-fundamentals	NEW	What is a market, asset classes (equity, fixed income, derivatives, crypto), market participants (buy-side, sell-side, exchanges, clearinghouses), why markets exist
2	settlement-and-clearing	NEW	Trade lifecycle (execution → clearing → settlement), T+1/T+2, DvP, CCP role, netting, fails. Connects later to DeFi’s atomic settlement.

Phase 1b: Market Structure (4 steps)

Step	Note	Status	Covers
3	trading-fundamentals	EXISTS (244 lines, keep as-is)	Bid-ask spread, maker/taker, adverse selection, market maker P&L, historical context
4	volatility	SPLIT (keep concept half)	What vol is, realized vs implied, annualizing, VRP, rolling windows, volatility clustering, estimators. Remove LP connection → lp-as-short-vol. ~150 lines.
5	order-books	SPLIT from order-books-and-venues	CLOB structure, matching engine mechanics, order types, quoted vs effective spread, depth/resilience, queuing theory. ~175 lines.
6	glosten-milgrom-model	EXISTS (208 lines, keep as-is)	Formal adverse selection model

Phase 2: Options (2 steps)

Step	Note	Status	Covers
7	options-basics	EXISTS (162 lines, already created)	What an option is, calls/puts, payoff diagrams, buying vs selling, straddles, LP-as-short-straddle preview
8	the-greeks	NEW (from split of options-payoffs)	Delta, gamma, theta/vega/rho overview, gamma P&L formula, IL-gamma connection (${\Gamma }_{\text{eff}}=-1/4$), short straddle vs LP comparison table. SVG diagrams for delta/gamma curves. ~175 lines.

Phase 3: DeFi Mechanics (3 steps)

Step	Note	Status	Covers
9	constant-product-amm	EXISTS (353 lines, keep as-is)	xy=k invariant, marginal/execution price, price impact, fees, geometry. Borderline length but tightly coupled math.
10	bonding-curves	EXISTS (272 lines, keep as-is)	General framework, curve shapes, virtual AMM, Pump.fun lifecycle
11	impermanent-loss	TRIM (378 → ~300 lines)	Core derivation stays. Trim “Connection to Options” and “IL Is an Adverse Selection Cost” sections to 2-3 sentence pointers → lp-as-short-vol and microstructure notes handle those connections.

Phase 4: LP Economics (2 steps)

Step	Note	Status	Covers
12	lp-profitability	EXISTS (246 lines, keep as-is)	Fee income model, break-even formula, profitability quadrant, dynamic considerations, market-maker analogy
13	lp-as-short-vol	NEW (from split of volatility + impermanent-loss + options-payoffs)	The IL↔σ² connection, break-even vol as LP’s implied vol, full short-straddle mapping table, when fees beat IL as a vol question. ~100 lines.

Phase 5: MEV (3 steps)

Step	Note	Status	Covers
14	blockchain-transaction-lifecycle	TRIM (348 → ~270 lines)	Steps 1-5 lifecycle, Ethereum vs Solana comparison. Move MEV bot pseudocode (lines 171-248) to mev-fundamentals.
15	mev-fundamentals	EXISTS + GROW (192 → ~270 lines)	MEV taxonomy + MEV bot pseudocode (moved from lifecycle note)
16	sandwich-attacks	EXISTS (276 lines, keep as-is)	Plain English + formal math + Pump.fun vulnerability

Phase 6: Capstone (1 step)

Step	Note	Status	Covers
17	pump-fun-economy	TRIM (448 → ~350 lines)	Remove duplicate AMM/LP explanatory sections (reader already knows these). Replace with 2-3 sentence summaries + wikilinks. Keep microstructure analysis, revenue model, net flow analysis, structural insights.

Venue Landscape (1 step, after Phase 1b)

Step	Note	Status	Covers
18	trading-venues	SPLIT from order-books-and-venues	Dark pools, internalizers/PFOF, RFQ, venue landscape tables (TradFi, crypto, on-chain). ~175 lines. Optional — can be read after step 5 or skipped.

Track B: Market Microstructure Deep Dive

Prerequisite: Track A through Phase 1b (steps 1-6).

Step	Note	Status	Covers
B1	kyle-lambda	EXISTS (190 lines)	Kyle’s 1985 model, price impact, informed trading intensity
B2	ho-stoll-inventory-model	EXISTS (170 lines)	Inventory-based spread model
B3	spread-decomposition	EXISTS (151 lines)	Huang-Stoll decomposition of the spread
B4	matching-engine-system-design	EXISTS (555 lines)	System design interview walkthrough. Longer session by design.
B5	almgren-chriss	FUTURE	Optimal execution under market impact
B6	maker-taker-economics	FUTURE	Fee models, rebate structures, incentive design

Note Splits Summary

Original	Becomes	Action
order-books-and-venues.md (348)	order-books.md (~175) + trading-venues.md (~175)	Split at line 165 (dark pools boundary)
options-payoffs.md (338)	options-basics.md (162, exists) + the-greeks.md (~175)	options-basics already created. Write the-greeks from Greeks section of old note.
volatility.md (266)	volatility.md (~150) + lp-as-short-vol.md (~100)	Keep concept half, move LP connection to new note

Note Trims Summary

Note	From	To	What moves out
blockchain-transaction-lifecycle.md	348	~270	MEV bot pseudocode → mev-fundamentals
impermanent-loss.md	378	~300	Options connection + adverse selection connection → pointers to lp-as-short-vol + microstructure notes
pump-fun-economy.md	448	~350	Duplicate AMM/LP explanatory sections → wikilink summaries

New Notes to Create

Note	Location	Content source
market-fundamentals	market-microstructure/	NEW content — research prompt needed
settlement-and-clearing	market-microstructure/	NEW content — research prompt needed
the-greeks	derivatives-pricing/	Extracted from options-payoffs.md Greeks section + new SVG diagrams
lp-as-short-vol	defi-markets/	Extracted from volatility.md + impermanent-loss.md + options-payoffs.md LP connection sections
order-books	market-microstructure/	Extracted from order-books-and-venues.md first half
trading-venues	market-microstructure/	Extracted from order-books-and-venues.md second half

Visual Strategy

Every math-heavy note gets at least one static chart showing the key shape, so the reader never has to imagine a curve from a formula alone. Notebooks provide interactive exploration (sliders, simulations). Manim animations are reserved for multi-step processes where seeing the transition builds understanding a still frame cannot.

Four categories of visuals:

Category 1: Architecture Diagrams — SVG in notes only

Static boxes-and-arrows. No animation adds value. Rendered by graphviz or svgwrite scripts in docs/diagrams/.

Diagram	Note	Tool
High-level architecture (Gateway → Sequencer → Engine → outputs)	matching-engine-system-design	graphviz
Data flow between stages (ring buffers, journal, consumer cursors)	matching-engine-system-design	graphviz
Order book data structure (SortedDict + deque layout)	matching-engine-system-design	svgwrite
Instrument partitioning (Sequencer → Partitioner → N engines)	matching-engine-system-design	graphviz
Failover (primary/standby + journal replication)	matching-engine-system-design	graphviz
Market data feeds (L1 vs L2/L3, snapshot + incremental)	matching-engine-system-design	graphviz
Transaction lifecycle flow (wallet → mempool → block producer → chain)	blockchain-transaction-lifecycle	graphviz
Sandwich attack pool state (3 steps with reserve changes)	sandwich-attacks	svgwrite

Count: 8 SVGs

Category 2: Function Shape Charts — static SVG in note + interactive in notebook

The note shows the shape (matplotlib render script → SVG). The notebook lets the reader drag sliders. The note should not require opening the notebook to understand the concept.

Chart	Note	Notebook	What it shows
Hockey stick payoffs (call + put)	options-basics	code/options-basics/	Flat then linear — the fundamental option shape
Short straddle P&L (inverted V)	options-basics	code/options-basics/	Max profit at strike, losses both directions
Delta curve (S vs Δ for call and put)	the-greeks	code/the-greeks/	Sigmoid, ATM ≈ 0.5, deep ITM → 1, deep OTM → 0
Gamma curve (S vs Γ)	the-greeks	code/the-greeks/	Peaked at ATM, near zero deep ITM/OTM
IL vs short straddle overlay	lp-as-short-vol	code/the-greeks/	Where analogy holds (near strike) and diverges (tails)
IL curve (r vs IL%)	impermanent-loss	code/defi-impermanent-loss/	The sech shape, symmetric in log-price
Break-even frontier (σ vs V_d/L)	lp-profitability	code/defi-lp-profitability/	Boundary between profitable and unprofitable zones
Constant-product hyperbola with tangent/secant	constant-product-amm	code/defi-constant-product-amm/	xy=k curve; tangent = marginal price, secant = execution price
Price impact: AMM vs Kyle linear	constant-product-amm	code/defi-constant-product-amm/	α/(1+α) vs α — the concavity
Bonding curve shapes overlaid	bonding-curves	code/defi-bonding-curves/	Linear, quadratic, exponential, virtual AMM

Count: 10 SVGs (rendered by matplotlib scripts in docs/diagrams/)

Category 3: Manim Animations — for multi-step processes

Rendered as MP4 in animations/, embedded or linked from notes. Reserved for concepts where watching the transition builds understanding.

Animation	Note	Why animation helps
Market order walking the book	order-books	Depth levels consumed one-by-one; reader sees why effective spread > quoted spread
Reserve rebalancing as price moves	impermanent-loss	Arbitrageurs trade as external price shifts; X shrinks, Y grows. The mechanism, not just the formula.
Delta shifting with price	the-greeks	Tangent line on payoff curve slides as S moves. Delta is the slope; watching it change makes gamma visceral.
Sandwich attack sequence	sandwich-attacks	3-beat: (1) initial pool state, (2) bot front-runs → reserves shift → price rises, (3) victim buys at worse price, (4) bot back-runs → profit extracted
Bonding curve lifecycle	bonding-curves	Tokens minted along curve, SOL accumulating in reserve, then graduation → transition to AMM pool. Two phases as one continuous motion.
Fee vs IL race	lp-profitability	Price path over time with two counters: cumulative fees (climbing steadily) vs cumulative IL (spiking on big moves). The race plays out live.

Count: 6 manim animations

Category 4: Notebook-only interactive charts

Value is in dragging sliders, not looking at a fixed image. No static SVG or manim version needed.

• Break-even calculator (fee/volume/TVL sliders) → code/defi-lp-profitability/
• Profitability heatmap (σ × V_d/L) → code/defi-lp-profitability/
• Rolling volatility window explorer → code/volatility/
• GBM price path simulator → code/defi-lp-profitability/
• Fee accumulation over trade sequence → code/defi-constant-product-amm/

Visual totals

Category	Tool	Count	Location
Architecture diagrams	graphviz/svgwrite	8	docs/diagrams/ → note diagrams/ subdirs
Function shape charts	matplotlib	10	docs/diagrams/ → note diagrams/ subdirs
Process animations	manim	6	animations/
Interactive exploration	Altair/Plotly in notebooks	~5	code/*/notebook.py (existing or new)
Total		~29

Study Guide Rewrite

Rewrite 2 - Areas/Finance/study-guide.md to reflect the new two-track structure. Include:

• Track A overview with 6 phases, 18 steps
• Track B overview with prerequisites and reading order
• Per-step: note link, notebook link (if any), estimated time, focus points, “you’re ready when” checkpoints
• Tips section (read note first then notebook, use sliders, skip math on first pass)

Wikilink Updates

After splits:

• All references to [[order-books-and-venues]] in other notes need updating to [[order-books]] or [[trading-venues]] depending on context
• All references to [[options-payoffs]] need updating to [[options-basics]] or [[the-greeks]]
• The reading order callout in constant-product-amm.md needs rewriting for the new path
• code/index.md needs updating for any new/renamed notebooks
• derivatives-pricing/_index.md needs updating

Old Files to Delete

After all content is migrated:

• order-books-and-venues.md (replaced by order-books.md + trading-venues.md)
• options-payoffs.md (replaced by options-basics.md + the-greeks.md)

Implementation Order

1. Note splits — mechanical extraction, low risk
   • order-books-and-venues → order-books + trading-venues
   • options-payoffs → verify options-basics + write the-greeks
   • volatility → trim to concept + write lp-as-short-vol
2. Note trims — remove duplicate content, add wikilinks
   • blockchain-transaction-lifecycle — move MEV bot pseudocode out
   • impermanent-loss — trim options/adverse-selection connections
   • pump-fun-economy — replace duplicate AMM/LP sections with links
3. New content (research prompts needed for first two)
   • market-fundamentals — research prompt → write
   • settlement-and-clearing — research prompt → write
   • the-greeks — extracted + new SVG diagrams
   • lp-as-short-vol — extracted + IL-vs-straddle overlay chart
4. Architecture diagrams (8 SVGs, graphviz/svgwrite)
   • Matching engine: HLA, data flow, order book structure, partitioning, failover, market data feeds
   • Blockchain lifecycle: transaction flow
   • Sandwich attacks: pool state sequence
5. Function shape charts (10 SVGs, matplotlib)
   • Options: hockey sticks, straddle P&L, delta curve, gamma curve
   • DeFi: IL curve, hyperbola with tangent/secant, price impact, bonding curve shapes, break-even frontier
   • Connection: IL vs short straddle overlay
6. Manim animations (6 animations)
   • Market order walking the book
   • Reserve rebalancing (IL mechanism)
   • Delta shifting with price (gamma visualization)
   • Sandwich attack sequence
   • Bonding curve lifecycle (mint → graduate → AMM)
   • Fee vs IL race
7. Study guide rewrite — depends on all notes existing
8. Wikilink cleanup — final pass after all renames/splits
9. Delete old files — after verifying all content migrated
   • order-books-and-venues.md
   • options-payoffs.md

Sharpe Ratio

Skipped. One-paragraph concept that fits as a sidebar in the volatility note. Adding a dedicated step would slow the path without adding value. If a portfolio theory track is needed later, that’s a separate concern.