medium · Market Microstructure
In the Avellaneda-Stoikov model, if a market maker has a large 'Long' inventory position (q > 0), how will they set their quotes?
- Submit a market order to the exchange to liquidate immediately.
- Widen the spread while keeping the midpoint constant.
- Shift only the 'Ask' price upward to increase profit per sell.
- Shift both the bid and ask prices downward (Quote Shading).
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