medium · Market Microstructure adverse-selection
A market maker quotes 20.00 - 20.02. An informed buyer knows the true value is 20.05.
If the market maker fills this order, what is their loss per share, and what does it represent in microstructure theory?
- 0.01, representing order processing
- 0.02, representing inventory risk
- 0.03, representing adverse selection
- 0.05, representing market impact
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