Book Reviews and Reading List

Posted September 3, 2024

I have wanted to write a reading list for a while. I’ve been apprehensive because I didn’t want to include too much and wanted also to explain why the books were in the list. For example, if you trade crypto there is not much point reading the Hull interest rate models book. This list likely will be a work in progress so keep that in mind. As I write this I realise I have a problem with how many books I have.

These are not referral links, they are just Amazon links. Feel free to source the books from wherever you like.

General

This book has a lot of interesting information. It really deserves a book review of its own. I personally like the topics on fractional differencing, volume bar sampling, and hierarchical risk parity (HRP). My only critisim of the books is some of the more useful things cannot be used directly. Volume imbalance bars, for instance, seem to degenerate in the book’s implementation. This is easy to correct and a solution can be found here.

Kaufman’s book is more of an encyclopedia of techniques. Its useful as a reference book.

Ernie Chan’s books also come well recommended.

Portfolio management

This book is a must-have for anyone who wants to trade multi-asset portfolio strategies. It covers a massive range of topics around portfolio risk and portfolio construction.

Gappy’s book is an excellent guide to factor investing and also factor models for portfolio management.

Market Making / Trade Cost Analysis

This space is filled with books about Avellaneda & Stoikov models and stochastic control theory. A lot of it I don’t even really understand and I had to learn stochastic calculus at university. In my opinion, there are no good books on market making that I know. The closest one is about trade impact modelling and trade cost analysis. Market making is very similar to these ideas but in essence, you have a forecast model and you trade when cost < forecasts. So being efficient and being able to measure the costs is important.

Strategy Optimisation

This book is great. The issue with A/B testing is that you want to switch over to the best model as quickly as possible. The author is ex-getco and its very well written.

Timothy Master’s books are a good read for those wanting to build quantitative strategies. He does a lot of data mining, so the books address common issues that come from this. They include topics like, probability of false discovery, combinatorial symmetric cross validation (CSCV), optimisation objectives and much more.

Statistical Arbitrage

This book has some interesting chapters about mid-correction and dealing with jumps.

This is not a book but an article. It’s about how to build a risk neutral long short portfolio strategy. It is very simple and generic and can be used either with rich/cheap (mean reversion) or momentum alphas.

Volume Price Analysis

For discretionary trading Volume profiles are useful for understanding where to place stop losses and take profits. What happened last time the market was at a price often gives insight into what will happen next time the same price is reached. Volume profiles tell you where a disproportionate amount of trading happened in the past and also if those orders are still there.

These books are mostly printed ebooks. They are cheap but are an introduction to how to read volume profiles for scalping.

Macro / Cycle Analysis

This is a book about credit and the effects of credit cycles on asset prices. It has some interesting points about not trying to time the market, but trying to position relative to the correct point the credit cycle.

Risk Management

This was a course book from my master’s degree. It’s an excellent foundational book on portfolio risk modelling.

Regime Change

This isn’t really that great a book. It is more of a paper that was converted into a book. The ideas around direction change and having a time-invariant way to classify price changes are interesting. The ultimate conclusion of the book is that their method doesn’t outperform other strategies. The general idea is however useful if adapted.

Books About Traders

This is a book about the life of someone who was a pit trader in the 80s. He was very successful and is just a very scrappy and likeable guy. There are a few interesting anecdotes to adapting to the world as it more from floor trading to screen trading.

I have not read this but own it as it was a gift when I started at a hedge fund. It is mainly on here as people say you should read it. And they are correct, I really should get around to reading it.

Peter L. Bernstein

Peter is an economic historian and is one of the few people who could write a book about a history of probability theory that is actually interesting to read.

Against the gods, is about how probability theory was used initially to play games and then adapted for financial modeling and trading.

Power of gold is a story about the evolution of money and how gold came to be used as money.

Tail Risk Management

These two books are interesting but are likely not useful for 99% of people. The idea summarised is that options can be used to hedge downside risk. Options are also expensive due to theta and also in a normal market, they have delta, which you may not want as it interferes with the core strategy. So by combining OTM puts and ATM calls, you can be long gamma and flat theta and delta. So you basically get free insurance. The reason I don’t think this is for most people is the risk of an options book rarely stays the same as exactly what you wanted so it needs to be actively managed. If you don’t know what you’re doing, you might add more risk than the portfolio you’re meant to be hedging.

Trading Platform and HPC

This book is not the best. That said, there are not many end-to-end books on the topic of HFT trading platforms. If you are new to trading platforms, this is one of the few overviews I have seen.

This book is mainly about optimisation and instrumentation. What I liked about it most is that it says, “Don’t assume measure”. This is super important with building trading platforms as measuring end-to-end latency is not trivial. How do you know if it’s fast if you can’t measure it?

General Programming

This book is a collection of Joel Spolsky’s blog articles from around 2000. It’s old but they are easy to read and some of the ideas like “eat your own dog food” or “cardboard Chewbacca” are timeless.

Refactoring

This book by Kent Beck covers a topic I often struggle with. When working on code you often want to clean up parts. This covers how to do that and how to organise PRs so that it is not a nightmare for other people to code review.

This book is about refactoring and although I don’t agree with the core premise which is that functions should only be 5 lines. It is one of the few books that shows how to step by step re-organise code, extract sections and clean it up.

The two hardest problems in programming are overflow errors, cache invalidation and naming things. This book is a small succinct discussion of the latter topic.

Rust

This is only a small book and covers some of the weird ways that rust works that you might not expect. It is good for helping you to understand some of the lesser-covered topics.

This is super specific to writing interprocess communication libraries. In general, synchronisation is something to be avoided in HPC since it is super slow. It is important to deeply know about how atomics work since they are a lightweight way to achieve synchronisation if needed. Seq locks use atomics are are often used in trading platforms for L1 order book feeds.

This is a rust reference book. So it is not really meant to be read cover to cover.

Permaculture

This section is mainly for me, but if you’re interested, these are the best books i’ve read.

This was a text book for my PDC and is a great book

The Seymour book is known as the bible of self-sufficiency. It is an old book but full of useful information.

Masanobu Fukuoka’s book about farming in harmony with nature rather than fighting it.

This is a short book that covers everything about the ecosystems of healthy soil.

Sepp Holzer is really well known in the permaculture world. The book is about restoring the ecosystem of a large area of Spain. His techniques are relatively simple and are mainly about helping the land re-invigorate itself.

A story about Gabe Brown’s farm and how they used regenerative agriculture to save their farm. Regenerative agriculture is about mixing livestock and arable agriculture and working them together. The net result is healthy soil, healthy plants, healthy animals and higher yield for lower costs.

This is a collection of low-tech solutions to reduce your carbon footprint without reducing quality of life.

Worms are really important to healthy soil, they airate, integrate carbon into the soil and improve drainage. The best set up I have seen was in Spain and used upcycled bath tubs filled with worms. When it rained, the water was collected via the drain hole for compost tea, then every 6 weeks half the volume could be added to the garden.

If there is anything that you feel is missing from the list then please let me know and ill try to read it and add it.