The Handbook of Fixed Income Securities

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1. JumpCrisscrossMar 2012
   Hmm...challenging question since the topic it's asking about, finance, is so broad.

   Wikipedia the time value of money, valuation of perpetuities and annuities, modern portfolio theory, mean-variance optimisation, and related topics. Really understand these. Also check out the efficient market hypothesis and behavioural economics. Doing this via Wikipedia is probably better than some pre-packaged finance textbook because it's hard.

   Start with bonds: Fabozzi's Handbook of Fixed Income Securities.

   For equities first try Pricing the Future - it gives a rare historical context to the Black-Scholes equation. I suppose reading McKinsey's Valuation is good for understanding cash flow valuation. Hull's Options, Futures, and Other Derivatives is the cornerstone piece of the field, followed closely by Paul Wilmott on Quantitative Finance. If you get volatility you understand the liquid equity markets.

   Now you understand basic theoretical finance and the entire capital structure (Google that).

   Final building block is global macro (not college macroeconomics - you'll need to grab a textbook for that). For this I don't know of a good book. Fortunately, the IMF puts out solid Article IVs, analysts and economists write stuff everywhere, and the Fed, World Bank, WEF, IMF, and a host of other acronyms publish enough data that you can play with to get your feet wet.

   From there it literally involves typing things into Amazon, and failing at that, Google, and failing at that, LinkedIn. More Money Than God gives a nice history of hedge funds. The Quants is a fun read of the newer players. You can Wikipedia banks' histories and financial crises.

   Go through material because you're curious, not to get through it. Follow your curiosity down branches.

   The Quora community has done a lot of good at fleshing out these questions.

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2. TheTankNov 2024
   It's a tough question because most of what I learned was on the job and I don't really remember books specifically on the topic. It also depends on what product and market you are trading, and on what channels (on exchange, over the counter etc.)

   I would say it starts with knowing the product you trade and their dynamics inside out. How to make a price for it, what dynamics can change that price etc. It's also a good idea to understand related instruments as typically you would use them for price formation and hedging [1][2].

   The second bit is to understand electronic trading infrastructure and the market microstructure such as how orderbooks work, and some trading algos [3]

   If you're also interested in the infrastructure behind related to low latency, you can read about FPGAs, Exchange co-location etc. There is a fascinating blog on the network infrastructure [4] and the author (Alexandre Laumonier) also wrote a few books on that topic.

   A lot of market-making is bespoke and proprietary. For example your pricing model, hedging model, etc. It's also constantly changing depending on events (e.g. the elections) or market conditions (correlations changing). But a good place to start is to use some simple pricing model such as making a blend of other prices in other venues, or for derivatives making up the price based on the underlying price and other elements which vary depending on what the derivative is.

   While you would not be able to gain direct market access to, say, the NYSE, a lot of crypto platforms offer APIs for users to build trading bots as a training ground. For example Bitmex, or Deribit. But before doing this I recommend understanding the contract mechanics inside out. For example, the perpetual futures have a very particular mechanism which means they are priced and traded differently than normal futures you'd read about in the Hull book.

   I have a few friends who built bots and make small markets on random cryptos for fun. In this particular case, you'd have to think a bit harder on how you hedge your positions (e.g. can you sell an illiquid coin and hedge with a liquid one for cheap?). One way of doing this may be to look at correlations between coins to find the best hedge. Another consideration for crypto is the fee structure which you'd need to account for in your price.

   I don't know if it's a good idea to start doing this in crypto besides for fun though, mostly because it's a business that requires scale to derive a meaningful profit. But as an exercise it's definitely fun.

   [1]Options, Futures, and Other Derivatives (J. Hull)

   [2]The handbook of fixed income securities (Frank J. Fabozzi, Mc Graw-Hill Gb)

   [3]Algorithmic Trading & DMA (B. Johnson)

   [4]https://sniperinmahwah.wordpress.com/

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3. belterAug 2021
   We already knew a couple of things about economists and economic forecasting:

   - We knew economics can give Nobel prizes even in the same year, to practitioners defending absolutely and completely opposite theories:

   "Nobel prize-winning economists take disagreement to whole new level"

   https://www.theguardian.com/business/2013/dec/10/nobel-prize... https://www.irishtimes.com/business/economy/and-the-nobel-pr...

   - Many were also aware that: “The only function of economic forecasting is to make astrology look respectable” John Kenneth Galbraith

   "Despite forecasters’ best efforts, growth is devilishly hard to predict"

   https://www.economist.com/finance-and-economics/2016/01/09/a...

   Or we could go less diplomatic :-)

   "Joke about 364 Economists" https://youtu.be/XB1ciodyM1w

   So these officials were allowed to make decisions under the political pressures of the governments that named them. Their supposed independence will be used by governments to excuse themselves from their responsibilities. Its the usual trick of naming a commission with selected experts to get the recommendation you want. Then you argue you are just implementing the recommendation of the 'independent' commission.

   The answer probably is that despite all the data and expertise, central banks know less than your average hedge funds or economics think-thank. These decisions were done by driving blind.

   I found this analysis unusually sober and interesting (for JP Morgan work...):

   "Entering uncharted waters: Understanding negative bond yields"

   https://am.jpmorgan.com/sg/en/asset-management/per/insights/...

   Some interesting bits: -------------------------------

   "Fixed income markets have entered uncharted waters, with over USD 17trillion of debt trading with a negative yield."

   "The Handbook of Fixed Income Securities by Frank Fabozzi, widely considered to be one of the most trusted resources for bond investing, has no mention of negative yields in its 1,803 pages. And yet today, negative yields are pervasive around the developed world..."

   "...Forced buyers are profit-agnostic: they are holding the bond for a reason other than making a profit. One example of a forced buyer is a central bank buying bonds in order to achieve asset purchase targets. In places like the eurozone and Japan, for instance, central banks own 21% and 48% of their own outstanding government debt..."

   "Negative-yielding bonds overseas are weighing down yields in the U.S. However, without the adoption of NIRP by the Fed it is difficult, but not impossible, for bond yields in the U.S. to go into negative territory."

   -------------------------------

   Any analysis of what will happen next cannot be made based just on the Economics books sitting on your desk. For sure would require a political, sociology and psychology expertise your average economist is probably not qualified for. Certainly not the ones at your average central bank.

   The real fun will probably start if China and US tensions rise. The 10 year U.S. Treasury Yields was at 1.75% and its now at 1.15% and probably going now:

   "10-year Treasury yield drops to 1.15%..." https://www.cnbc.com/2021/08/02/us-bonds-treasury-yields-ris...

   Hint to Economy academics. Predict US negative interest rates now! There is a Nobel prize somewhere waiting for you.

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