medium · Market Microstructure spread-econ
A dealer's risk aversion γ is 10^-4. They hold a long position Q = 10,000 shares in a stock with daily variance σ² = 0.5.
If they use simple quote shading, by how much should they shift their midpoint downward to reach their target inventory of zero?
- $0.50
- $0.25
- $5.00
- $0.05
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