Market Making Interview Vocabulary
Core market-making interview vocabulary: bid, ask, spread, fair value, inventory, skew, adverse selection, fill, mark, and PnL.
Candidates new to bid/ask, spread, inventory, skew, adverse selection, and PnL terms.
Bid, ask, and spread
The bid is where you buy, the ask is where you sell, and the spread is the gap between them. Spread compensates for uncertainty, costs, and risk.
Fair value and midpoint
Fair value is your estimate of what the instrument is worth. The midpoint of your quote often starts near fair value, then moves with inventory or information.
Inventory and skew
Inventory is your current position. Skew means shifting quotes to encourage trades that reduce unwanted inventory or reflect a directional view.
Adverse selection and fills
Adverse selection means counterparties are more likely to trade when your quote is favorable to them. A fill is not always good news; it may reveal information.
Common mistakes
Candidates often memorize definitions without applying them. In interviews, each term should connect to a quote, update, or risk decision.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.