Market Making PnL Interview Intuition
Market making PnL interview intuition for realized spread, inventory mark, adverse selection, and trading-game score review.
Candidates reviewing trading-game score mechanics.
PnL has realized and inventory components
A trade can earn spread immediately, but the remaining inventory can gain or lose value as fair value changes.
Realized spread is not the whole score
Buying below fair value or selling above fair value looks good, but carrying the resulting position can still create later losses.
Concrete example
If fair value is 100 and you buy at 98, you have a 2-point mark-to-market gain at that moment. If fair value later drops to 95, the inventory mark changes.
Adverse selection shows up in PnL
If you are filled mostly when your quote is stale, realized spread can be overwhelmed by fair-value moves against your inventory.
Review decisions, not only score
A good realized PnL can come from luck, and a bad one can come from a defensible quote. Review the process.
Common mistakes
Candidates often celebrate earning spread without checking whether the trade created bad inventory exposure.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.