Skip to content
All library documents

Game Theory Reading for Market Making and Trading Interviews

Article Quant Q&A · Author: qwerty_uiop
Read the original

Summary

The document asks for accessible game theory resources that include practice problems, with a focus on market-making and card-game questions used in proprietary trading interviews. The accepted response recommends a trader-oriented book on applying game theory to trading, a paper and book on game-theoretic analysis of options, and a more mathematically demanding book on game-theoretic foundations for probability and finance.

The suggestions illustrate a range of levels and applications: practical trading strategy, financial intermediation and options, and probability and finance. The response gives recommendations rather than evaluating the texts in depth, and it does not provide sample exercises, interview strategies, or evidence comparing the books. Readers should therefore use the list as a starting point and choose based on their desired mathematical depth and need for practice material.

Key ideas

  • The request prioritizes introductory game theory and exercises relevant to trading interviews.
  • One suggested resource applies game theory to trading strategy from a practitioner perspective.
  • Other recommendations connect game theory to options and financial intermediation.
  • A further book offers a more mathematical treatment of probability and finance.
  • The document lists resources but does not assess their exercise quality or interview usefulness in detail.

Tags

Market makingOptionsStatistics
Full text
# Recommendations for a text on game theory in the context of market making?


# Recommendations for a text on game theory in the context of market making?












I am looking for a textbook that can give me an introduction to game theory, and also practice problems that can help me build skills to tackle game theory questions.

I'm asking this in the context of market making: I am planning on interviewing with prop trading firms, and these firms tend to ask market making games or card games which have that game theoretic angle to it.

I did search for books, but I could only find large reference texts which are more suitable for someone with PhD level course/research in mind. Would be great if you could help me out. Thanks.

## Answer by Dimitri Vulis (score 6, accepted)

https://quant.stackexchange.com/a/54938

This book sounds like exactly what you want: Gaming the Market: Applying Game Theory to Create Winning Trading Strategies by Ronald Shelton. It is written from a traders' point of view rather than a quant's.

I also found this old paper very helpful: A Game Theory Analysis of Options: Contributions to the Theory of Financial Intermediation in Continuous Time by Alexandre Ziegler.

Edit: I noticed a new version of Ziegler's book https://www.springer.com/gp/book/9783540206682

This recent book may is a little on the math side, and probably has too much math for your purposes, but is an excllent game-theoretic approach to option trading: Game-theoretic foundations for probability and finance by Glenn Shafer and Vladimir Vovk. (it's an updated version of their old "Probability and Finance: It's only a game")

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.