spread-econ — Market Microstructure Practice Questions

99 free Market Microstructure questions on spread-econ: 21 easy, 55 medium, and 23 hard, every one exam-realistic and fully explained once you sign in. This is the fastest way to turn spread-econ from a weakness into a scoring area — drill it in 10-question reps with immediate feedback.

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1. If the dealer uses a quote shading parameter of κ = 0.00004 to manage inventory, what is the expected shift in
2. In the Avellaneda-Stoikov model, a market maker who is currently 'long' a significant amount of inventory will
3. A stock has a daily price volatility of 1%. If a trader uses the Roll model and finds that the autocovariance
4. Suppose the NBBO for GHI is $100.00 Bid × $100.05 Ask. A mar… — How will they likely 'shade' their quotes to m
5. If a stock's effective spread is $0.06 and the 5-minute realized spread for the same trade is -0.02, what is t
6. According to Roll's model, if the autocovariance of price changes for a stock is -0.0075, what is the estimate
7. If the market maker applies quote shading with a parameter κ = 0.0001, how will they adjust their midpoint fro
8. Using Roll's estimator, what is the estimated bid-ask spread?
9. If the dealer's quote shading parameter κ is $0.00004, what is the new quote midpoint?
10. If the current midpoint is $100 and the market maker is long 200 shares, what is their optimal bid price?
11. What does the resulting variance ratio suggest about the stock's price dynamics?
12. If the dealer uses a quote shading parameter of κ = 0.00004 and the current market midpoint is $30.05, what wi
13. If the estimated Cov = negative 0.0025 (in squared dollar terms), what is the Roll-implied effective spread?
14. According to Roll's (1984) model, what is the estimated bid-ask spread for this security?
15. A dealer sells 1,000 shares to a buyer at $30.08 when the NB… — What is the dealer's realized spread for this
16. What is the calculated Variance Ratio VR(2)?
17. In the Stoll (1978) model, if the volatility (standard deviation) of a stock doubles, what happens to the inve
18. An HFT market maker is long 500 shares. According to the Avellaneda-Stoikov model, how will the market maker a
19. An analyst calculates a Variance Ratio VR(5) = 0.70 for a st… — What does this specifically indicate about the
20. A stock has an NBBO of 50.00 bid and 50.06 ask. A trade occu… — According to the Lee-Ready algorithm, how shou
21. If the dealer wants to earn a 0.03 profit per side to cover inventory risk, what is the narrowest quoted sprea
22. A trade occurs for 100 shares of Acme Inc. at 50.06. At the… — Using the Lee-Ready quote rule, how should this
23. If the previous trade in the market occurred at 100.02, how is this new trade classified using the Lee-Ready a
24. Using the Lee-Ready algorithm, how should a trade at 25.03 be classified if the prevailing NBBO was 25.01 Bid
25. Given the initial National Best Bid and Offer (NBBO) midpoint was 25.05, what is the effective spread per shar
26. A buyer purchases 1,000 shares at $30.08 when the NBBO midpo… — What is the realized spread on this trade, and
27. According to the Roll (1984) model, what is the estimated bid-ask spread?
28. What is the Roll (1984) estimator for the bid-ask spread based on these four trades?
29. A buyer executes 1,000 shares at $30.10 when the NBBO is $30… — What is the Realized Spread on this trade?
30. If volatility suddenly doubles to 4% per day, how should the inventory component of the spread change accordin