In modern trading industry, MM shall be quantitative, statistical and systematic.
Market Maker
我是这么理解的： 一个人站在exchange里面，明码标价表明他的bid/ask price:
- 如果你想找我买facebook，那么你应该付给我多少钱
- 如果你想找我卖你的fb，那么我只会出多少钱从你这买
Maven Introduction
A brief introduction to market-making
The role of a market maker is to continuously quote prices at which they are willing to buy and sell a given security (e.g. shares, bonds, options). These quotes are known, respectively, as the ‘bid’ and ‘offer’ (or ‘ask’). This enables investors to buy and sell at any time, even if there is no other investor that wants to do the opposite trade at that particular time. A market-maker will hold the position as inventory until another investor comes along to take the other side of the trade.
The market-maker aims to profit by, on average, buying at lower prices than they sell at. If prices never moved, their average profit would be determined by the difference between their quoted bid and offer prices (the ‘bid/ask spread’). In order to increase their chances of selling/buying after a buy/sell, the MM will generally lower/raise their prices. This is known as ‘retreating’.
If a price moves violently up/down, while a market-maker is net short/long, they will lose money. This is known as being ‘run over’.
A market-maker can reduce their chances of being run over by widening their bid/ask spread, as this gives them more room to adjust their prices before they end up selling/buying lower/higher than they originally bought/sold. If they widen their prices too much though, investors may be discouraged from trading or may trade with another market-maker.
Market Making Game Interview
看了这么多面试，总结：就是用概率/期望值估计一个东西的价格，然后state你的价格，看最后是赚还是亏。
- Sum and Probability: https://www.quora.com/Market-Making-How-do-I-prepare-for-the-Make-me-a-market-on-this-interview-question
- Cards: https://math.stackexchange.com/questions/1227122/market-making-card-bet-game
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