6 problems
Market making interview questions
Quoting, adverse selection and position management. These are the questions that separate people who can price under uncertainty from people who can only compute.
Make a market on two dice
Warm-upMake me a market on the sum of two fair dice.
The informed counterparty
StandardYou quote a market on a coin flip paying 100 for heads. Your counterparty may have seen the coin. How should your quote change?
You are long and you do not want to be
StandardYou have been lifted repeatedly and are now long well beyond your limit. What do you do with your quote?
How wide should the spread be?
HardWhat determines how wide you quote?
Price something you cannot look up
HardMake a market on the number of petrol stations in the country you are sitting in.
How much do you bet?
StandardYou have an edge: a bet wins 60 percent of the time at even money. What fraction of your capital do you stake?