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The two-sided quote that loses on every fill

Asked at SIG

You post 9898 bid / 102102 ask on a contract you believe is worth 100100. Your counterparty, though, knows the true value VV, which turns out to be equally likely 9696 or 104104. They trade only when it's profitable for them, buying your offer if VV is high, selling to your bid if VV is low.

What is your expected profit on this trade? How wide would you have had to quote to avoid a guaranteed loss?

Your answer

This one is open-ended. Work it through, then check your reasoning against the full solution.

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