Game theory is the study of decisions made by people who know that other people are also deciding, and that everyone’s outcome depends on everyone’s choice. That is a precise description of a trading floor: your fill, your edge, and your risk all depend on what the rest of the market does. Interviewers at trading firms lean on game theory because it separates candidates who can compute an expected value from candidates who can compute an expected value while the other side is trying to take their money. This lesson builds up the language of games, shows how to solve them by hand, works through the classic examples you will be asked about, and ties each idea back to how it appears in a quant interview and on a real desk.
Table of Contents
Already have an account? Log in!