medium · Market Microstructure
A dealer estimates that the 'adverse selection' component of their spread is 0.10 per side, and order processing costs are 0.02 per side.
If the dealer wants to earn a 0.03 profit per side to cover inventory risk, what is the narrowest quoted spread they can offer?
- 0.30
- 0.15
- 0.20
- 0.24
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