Learning route and project milestones
Must Know is the research core; Should Know adds interpretation and implementation; Advanced needs stronger preparation; Optional is a route choice. Understand core definitions before selecting tools by the problem. Domain arrows are an overview, not the required-edge list; use the chapter DAG.
- Chapters 1–3 establish the lifecycle, Python and time-data contracts. Preview return definitions in Chapter 11 and the market structure needed from Chapter 10.
- Chapters 4–9 cover calculus, linear algebra, probability, inference, regression and optimization. Chapter 8 uses CAPM to practice regression; its equilibrium interpretation waits until Chapter 14.
- Chapters 10–15 supply markets, statements, valuation and asset pricing. Complete Project 1 after Chapter 11 and Project 2 after Chapter 15.
- Chapters 16–21 cover dependence, cointegration, volatility and portfolios. Chapter 19 can be revisited after basic portfolio theory. Complete Project 3 after Chapter 21.
- Chapters 22–28 develop and combine alpha hypotheses. Small ledgers illustrate methods; assess strategy validity only after the backtesting, validation and cost material in Chapters 29–35.
- Chapters 29–35 cover backtests, biases, validation, performance, risk and costs; add execution in Chapter 36, then Projects 4 and 5.
- Chapters 37–40 form the financial-ML core and Project 6. Chapters 41–43 add tools chosen by the problem; Chapter 45 organizes research into an executable project.
- Finish the Capstone. The derivatives route adds Chapter 44; stochastic calculus is not a prerequisite for starting equity-factor research.
Diagram source
flowchart TD
P[Python 2] --> M[Calculus and algebra 4–5]
M --> Q[Probability 6]
Q --> S[Inference 7]
S --> R[Regression 8]
R --> O[Optimization 9]
P --> D[Data and PIT 3]
D --> F[Markets, returns, statements, valuation 10–13]
F --> A[Asset pricing and factors 14–15]
R --> T[Time series 16–19]
A --> V[Portfolios 20–21]
O --> V
T --> V
V --> H[Factor research 22–28]
D --> B[Backtesting 29–32]
H --> B
B --> K[Risk 33]
B --> E[Microstructure, costs, execution 34–36]
K --> ML[Financial ML 37–43]
E --> ML
ML --> PROD[Engineering 45]
PROD --> C[Capstone]
Q --> STO[Derivatives 44: Advanced]
M --> STO
F --> STO
STO -. optional derivatives route .-> C
| Project | Prerequisite chapters | Completion criterion |
|---|---|---|
| Project 1: Financial data analysis | 2, 3, 10, 11 | Return, wealth, volatility and drawdown calculations checked against hand examples; historical data retain provenance. |
| Project 2: CAPM and Fama–French | 8, 11, 14, 15 | Check excess returns, units, HAC and exposure interpretation. |
| Project 3: Portfolio optimization | 9, 18, 20, 21 | Estimate inside training windows and compare rolling OOS baselines and costs. |
| Project 4: Multi-factor equity strategy | 12, 23–26, 28–31, 35–36 | Require PIT signals, historical universes, net returns and robustness; constructed sublabs do not close market evidence. |
| Project 5: Pairs trading | 16–17, 29–31, 35–36 | Select within training, freeze rules and reconcile self-financing OOS ledgers and costs. |
| Project 6: Machine-learning alpha | 31, 35, 37–40, 43 | Split by date, fit transforms inside training and compare baselines, net returns and stability. |
| Capstone | Methods from all six projects, 33, 45 | 18 report items and reproducible workflow; negative results can pass. Market execution has separate gates. |
Early preparation: download plans/dictionaries for P1; French format parsing for P2; equal-weight baseline for P3; filing PIT dictionaries for P4; alignment for P5; label calendars for P6; hypothesis and data feasibility for the Capstone.
Derivatives route: 4, 6, 9, 10, 11→44→volatility and numerical pricing. Execution route: 10, 29, 33–36, 45→event data, matching and inventory risk. Both are advanced routes. Establish a reliable simple baseline before deciding whether deep learning, LLMs or state-space models are needed. Keep project historical acceptance, constructed sublabs and market evidence distinct; report insignificant alpha and failure after costs faithfully.