Market making

Quoting a two-sided market: theoretical value, width, skew, and reading what a fill tells you.

1
Market structure
The order book, order types, priority, fees, and what a liquidity provider is paid for.
- 1.1Market structure: the book, the order types and who pays whom13 min
2
Making a market
Theoretical value, width as a function of uncertainty, and skew as a function of inventory.
- 2.1Theoretical value, width and skew12 min
3
Information and adverse selection
What a fill tells you, the winner’s curse, and updating on order flow.
- 3.1Reading the fill: adverse selection11 min
4
Inventory and risk
Position tracking, flattening, limits, and the cost of carrying risk.
- 4.1Inventory: carrying risk, shedding it, and the reservation price13 min
5
Trading games
The formats interviewers actually run, from dice markets to estimation markets.
- 5.1The trading game: quoting, requoting, and the questions at the end13 min
6
Bet sizing and risk preferences
Kelly, utility, risk of ruin, and when a negative-expectation trade is correct.
- 6.1Bet sizing, Kelly and risk of ruin12 min

Market structure