Market Making Expected PnL Interview Questions
Market making expected PnL interview questions for combining quote payoff, fill probability, adverse selection, and inventory cost.
Candidates connecting expected value to trading-game PnL.
Expected PnL is expected value
Expected PnL applies expected value thinking to market-making outcomes: probability of fill, profit if filled, loss if selected, and inventory cost.
Include fill probability
A quote with high profit if filled can still have low expected PnL if it almost never trades.
Concrete example
If a quote has a 20 percent chance to earn 2 and an 80 percent chance not to trade, the fill-only expected value is 0.4 before selection and inventory costs.
Subtract selection and inventory costs
If fills are more likely when the quote is wrong, expected PnL must account for adverse selection and the risk of carrying the position.
Realized PnL can differ
Expected PnL is an average under assumptions. One trading-game round can end above or below that expectation.
Common mistakes
Candidates often compute spread capture but ignore the probability and quality of the fill.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.