AppliedMultiple choice
Ignore fees, inventory risk and risk aversion entirely. Why would a market maker still refuse to quote with zero spread?
- ATo cover exchange fees
- BBecause informed counterparties only deal when the quote is wrong
- CTo be paid for the inventory you are obliged to carry overnight
- DBecause exchange rules impose a minimum quoted spread on each side
The worked solution is in Premium
The answer, the full working and the one idea to take away – for this and all 1,322 questions in the bank. Answer it in practice and your working is marked, with a known mistake named when you make one.
Learn the method
Reported in interviews at
More market making questions
- Who is on the other side?, part 1 of 3Foundation
- Your passive fills capture a half-spread of 2 cents a share and earn a rebate of 0.2 cents.Applied
- Your offer is lifted for large size a fraction of a second after a headline you…Applied
- A value will move up or down with equal probability.Applied
- Who is on the other side?, part 2 of 3Applied
- Quoting with inventory, part 2 of 3Applied