Questions / Quant trading, Markets & quotes
Quote to reduce inventory
Fair value is 100.00 and you quote 99.95 bid, 100.05 ask. You are too long, so you shift both quotes down by 0.02. What is the new ask?
Answer it in the app It's free. You get hints, a second try if you miss, and a follow-up question.
Show the answer and worked solution
Answer: 100.03 price
- A long book wants to sell more and buy less.
- Shifting both quotes down makes the ask more attractive and the bid less.
- The new ask is 100.05 − 0.02 = 100.03.
Interview shortcut. Long → shift down: 100.05 − 0.02.
Takeaway. Skew both quotes against your inventory.
In the app this has a follow-up where one thing about the setup changes. Try the follow-up.