Market Microstructure practice by topic

• spread-econ — 99 free questions
• mmf-core — 95 free questions
• adverse-selection — 93 free questions
• lob — 92 free questions
• market-impact — 75 free questions
• hft — 46 free questions

How do I learn market microstructure?

Begin with the limit order book — priority rules, spreads, queues — then layer in maker/taker economics, adverse selection, and impact models. KomFi drills it with 2,155 questions spanning intuition to quantitative mechanics.

Why does market microstructure matter for traders?

Execution is alpha: queue position, spread capture, and impact costs decide whether a good idea makes money. Microstructure is also the interview backbone for market-making and execution roles.

What is adverse selection in trading?

The risk that whoever fills your resting order knows something you do not — informed flow picks off stale quotes. Spreads exist largely to price this risk, and recognizing it is core to the discipline.

Free Market Microstructure practice questions

1. To protect against 'adverse selection,' what is the most likely response from the dealer?
2. According to the PIN (Probability of Informed Trading) model, if the rate of informed trader arrivals (μ) incr
3. If the market maker observes a net order imbalance of +10,000 shares (more buyers than sellers), what is the n
4. According to the Glosten-Milgrom framework, what is the adverse selection component of the half-spread?
5. If the probability of an informed trader is α = 0.3, what ask price should a competitive dealer set to ensure
6. If order processing and inventory costs are negligible, what is the competitive bid-ask spread according to th
7. If the analyst submits buy orders for 50,000 shares and the market's price impact coefficient λ is 0.00008, wh
8. If the probability of an informed trader is α = 0.2, what is the competitive ask price a dealer should set?
9. What is the Probability of Informed Trading (PIN)?
10. In the Kyle (1985) model, if the variance of noise trader order flow (σ_u^2) increases while the variance of t
11. What is the Probability of Informed Trading (PIN)?
12. A retail broker routes a buy order to a wholesaler and recei… — This practice is most criticized for which of
13. In the Kyle (1985) model, if the variance of noise trader order flow (σ_u) increases, what happens to the info
14. According to the Glosten-Milgrom model logic, what is the adverse selection component of the spread?
15. If an informed trader's advantage is typically $0.50 per share, what is the adverse selection component of the
16. If an informed trader submits a net buy order of 50,000 shares, how much will the market price change accordin
17. If a net order imbalance of +1,000 shares is observed, what is the expected price change according to the Kyle
18. If the probability of an information event is α = 0.30, the arrival rate of informed traders is μ = 400 per da
19. Using the Probability of Informed Trading (PIN) model, if the probability of an information event (α) is 0.40
20. Under the Glosten-Milgrom model, if the probability of an informed trader is α = 0.2 and the prior probability
21. What is the Probability of Informed Trading (PIN)?
22. If the probability of informed trading α is 0.3, what is the equilibrium ask price set by a risk-neutral deale
23. If the dealer wants to break even, what should the ask price be?
24. In the Glosten-Milgrom model, if the probability of an informed trader a is 0, what is the resulting bid-ask s
25. Which component of the bid-ask spread is specifically intended to protect a dealer from the risk of trading wi