Market Making Inventory Risk Interview Questions
Market making inventory risk interview questions covering long and short exposure, quote skew, risk limits, and position-aware updates.
Candidates asked to adjust quotes after buying or selling in a market-making game.
Inventory is accumulated exposure
Inventory is the position you hold after trades. Long inventory benefits from price increases; short inventory benefits from price decreases.
Inventory changes quote incentives
If you are already long, you may prefer quotes that make selling more likely and buying less likely. If you are short, the skew can go the other way.
Concrete example
If fair value is 50 and you are too long, you might lower both bid and ask or make the ask more attractive to reduce inventory, depending on the game rules.
Balance edge and risk
A quote that earns edge on one more trade can still be bad if it pushes inventory beyond a risk limit or creates too much drawdown exposure.
Communicate the position
A strong answer says what inventory you have, what risk it creates, and how the next quote responds to that risk.
Common mistakes
Candidates often keep quoting symmetrically after inventory changes. In interactive games, ignoring your current position is a major reasoning gap.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.