Market Making Interview Formula Sheet
A market-making interview formula sheet covering midpoint, spread, probability price, expected PnL, inventory marks, and useful caveats.
Candidates reviewing arithmetic and conversions for market-making interview drills.
Midpoint and spread
Midpoint is usually (bid + ask) / 2. Spread is ask minus bid. If bid is 48 and ask is 52, midpoint is 50 and spread is 4.
Probability to price
For a binary payoff of 100 if true and 0 if false, fair price is approximately 100 times the probability. A 63 percent event has fair value near 63.
Expected PnL
Expected PnL is expected payoff minus cost, adjusted for position. In toy games, keep gross payoff, trade price, and final mark separate.
Inventory mark
A simple inventory mark is position times current fair value or final settlement value, depending on the rules. Always confirm the scoring convention.
Common mistakes
Candidates often use formulas without stating the model. Formula sheets are review aids, not replacements for quote judgment.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.