Your question is Describe a market-making edge and inventory risk. Take a moment with it on the right.
Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).
Walk me through a market-making game: how do you set your bid/ask spread to capture edge while managing inventory risk? Explain how you would choose quote width, adjust quotes for inventory, estimate expected spread capture, and account for adverse selection. State the assumptions that drive your recommendation and describe how you would widen or skew quotes as inventory or volatility changes.
