Market Making Skew Interview Intuition
Market making skew interview intuition for asymmetric quote movement caused by inventory, information, and risk constraints.
Candidates asked why a market maker moves bid and ask asymmetrically.
Skew moves incentives
Quote skew changes how attractive it is for counterparties to buy from you or sell to you. It helps manage inventory and information risk.
Inventory skew
If you are long, you may skew quotes to encourage selling inventory. If you are short, you may skew quotes to encourage buying back exposure.
Concrete example
With fair value 100, a neutral quote might be 98 at 102. If you are too long, a skewed quote like 97 at 101 may make selling more likely and buying less likely.
Information skew
If recent flow suggests fair value is higher, both sides may move up. If inventory is also short, the skew and value update can point in the same direction.
Risk skew
Near a risk limit, skew can discourage trades that worsen exposure even if the midpoint estimate is unchanged.
Common mistakes
Candidates often treat skew as a directional prediction only. It can also be a risk-control tool.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.