Market Making Interview Questions: 20 Questions With Worked Answers
Updated: Oct 4
Market making interview questions test how you price uncertainty, quote a two-sided market and manage the risk of being wrong. Prepare to calculate expected values, explain a bid-ask spread, track inventory and revise your answer when new information arrives.This guide includes 20 practice questions with worked answers and a short trading game. The examples are hypothetical learning exercises, not questions attributed to a particular firm's interview.
If your interview covers a broader desk role, pair these exercises with the sales and trading interview questions. Practice both the calculation and a short explanation of its business meaning. For example, after estimating a fair value, explain what uncertainty could make you widen the spread, reduce the position, or ask for more information. A correct number is stronger when the interviewer can follow the decision it supports.
What to prepare for a market making interview
A market maker quotes a price to buy, called the bid, and a price to sell, called the ask. The gap is the spread. Buying at the bid and selling at the ask can earn that spread, but prices can move before the position is closed. Fees, hedging costs and informed counterparties can also turn a trade into a loss.
Start with probability, expected value, mental arithmetic and clear explanations. Then add the product knowledge the role requires. An options role may require Greeks; a quantitative research role may emphasize data analysis or coding. Read the job description and the firm's own preparation materials before choosing your practice topics.
Jane Street's Probability and Markets Guide is a useful starting point for probability and market-making exercises. Its trading interview overview describes its own process, which should not be treated as a universal interview format. For background on liquidity provision, see Optiver's market-making explainer.
In my experience interviewing candidates, a clear explanation of a decision is much more useful than a confident answer with no reasoning behind it. That is the communication habit I would practice here: state your assumptions, work through the problem and make it easy to follow.
Market making interview questions on quotes and risk
1. What does a 99 bid and 101 ask mean?
You are willing to buy at 99 and sell at 101, for a stated quantity. The spread is 2 and the midpoint is 100. If the interviewer buys from you, you sell at your ask and your inventory decreases. If they sell to you, you buy at your bid and your inventory increases.
2. Does earning the spread guarantee a profit?
No. Suppose you buy one unit at 99, then its value falls to 95 before you can sell. Selling at 95 realizes a loss of 4 before costs. A spread is potential compensation for providing liquidity and taking risk, not guaranteed income.
3. How would you choose an opening quote around a fair value of 100?
First ask about the product, uncertainty, trade size and information available to the counterparty. In a simplified game, 98 bid and 102 ask could be an opening quote. Explain that the numbers are illustrative. There is no uniquely correct spread without the rules and risk assumptions.
4. You are already long. How might you adjust your quotes?
All else equal, you might move both quotes down to make further buying less attractive and selling more attractive. For example, moving 99/101 to 98/100 lowers your bid and makes your ask more competitive. You could also reduce bid size or hedge. This inventory adjustment does not necessarily mean your estimate of fair value has fallen.
5. What is adverse selection?
Adverse selection is the risk of trading with someone whose information or timing gives them an advantage. If a counterparty buys from you just before value rises, your sale may have been too cheap. Repeated trades against your quote can contain information, but they do not prove the counterparty knows more.
6. What changes when volatility increases?
Greater price uncertainty can justify wider spreads, smaller quote sizes or more hedging, subject to the product and venue's rules. Distinguish a change in fair value from a change in uncertainty. Avoid claiming that market makers must always maintain the same spread or always withdraw during volatility.
7. What would you do with a trade that breaches a risk limit?
Do not assume you can ignore the limit because the trade looks profitable. Clarify whether the trade is proposed or already executed. For a proposed trade, consider permitted size, available hedges and escalation. For an executed breach, communicate it promptly and follow the firm's risk procedures.
8. How do limit and market orders differ?
A limit order specifies the worst acceptable execution price, but may not execute. A market order prioritizes execution and can fill at several prices when depth is limited. In an interview, discuss the trade-off between urgency, price control and available liquidity rather than calling either order type universally better.
Probability and expected-value questions
9. What is the expected value of a fair six-sided die?
The expected value is 3.5: add 1 through 6 to get 21, then divide by 6. It is the probability-weighted average, even though 3.5 is not a possible outcome of a single roll.
10. A contract pays $10 on heads and $0 on tails. What is its fair value?
With a fair coin, no costs and no discounting, the expected payoff is $5. That is 0.5 × $10 + 0.5 × $0. A trading quote may differ because it also reflects uncertainty, inventory, costs and the counterparty's information.
11. You win $3 with probability 40% and lose $1 otherwise. Is the expected payoff positive?
Yes. The expected payoff is 0.4 × $3 + 0.6 × (−$1) = $0.60. Positive expected value does not mean every play wins, and it does not by itself determine an appropriate position size.
12. What is the probability of at least one six in two independent die rolls?
It is 11/36, or about 30.6%. The probability of no six is (5/6) × (5/6) = 25/36. Subtract that from 1. The complement method avoids counting the two-sixes outcome twice.
13. What is the expected sum of two fair dice?
It is 7, because each die has expected value 3.5. Linearity of expectation lets you add the expectations. Independence is not required for that rule, although it matters when calculating many joint probabilities.
14. A bag contains three red and two blue balls. What is the chance of drawing two red balls without replacement?
It is (3/5) × (2/4) = 3/10, or 30%. After the first red ball is drawn, only two red balls remain among four balls. State the without-replacement assumption before calculating.
15. How should you respond when the probability assumptions are unclear?
Ask a short clarifying question, then state the assumption you use. For example: “Are the draws independent, and do I replace the first ball?” If the interviewer wants you to proceed without more information, explain how the answer changes under different assumptions.
A worked market-making game
The following three questions use one hypothetical game. Each contract pays the sum of two fair six-sided dice at settlement. Trades have no fees. You start with zero inventory, and the counterparty initially has no extra information.
16. Make an opening market in the dice contract
The expected payoff is 7. An illustrative opening market is 6 bid, 8 ask for one contract. Explain that the spread reflects your willingness to take uncertainty in this simplified game. Confirm the size and whether you may change quotes after each trade.
17. The counterparty buys two contracts at 8. What is your position?
If your quote allows that size, you are short two contracts and have received 16. If the dice sum is 9, you owe 18 at settlement and lose 2. If the sum is 5, you owe 10 and earn 6. Check size first: a one-contract quote does not automatically authorize a two-contract fill.
18. You learn that the first die is a six. How do you update?
The conditional expected payoff becomes 6 + 3.5 = 9.5. Start with that new fair value, then account for your short position and the remaining uncertainty. An illustrative 9/10 quote centers on 9.5. With a short position, you might instead make your bid more competitive to encourage counterparties to sell to you.
Keep three things separate: your fair-value estimate, your quote and your inventory. New information changes the first. Risk preferences and position size influence the other two. That distinction makes your reasoning much easier to explain.
Behavioral and communication questions
19. Tell me about a decision you made with incomplete information
Use a true example from work, study or a project. Explain what you knew, what was uncertain, which alternatives you considered and what you learned. You do not need to pretend it was a trading decision.
Hypothetical answer structure: “We had to choose between two approaches before all the data was available. I identified the main unknown, tested what we could quickly and chose the option that was easier to reverse. The result was [a real outcome], and I would now improve [a specific part of the process].” Replace every placeholder with your own experience.
20. What would you do if the interviewer points out an error?
Acknowledge it, locate the mistake and redo the relevant step. For example: “You're right. I treated the second draw as independent, but it is without replacement. The second probability is 2/4, so the answer is 3/10.” Correcting your reasoning is more useful than defending an answer you know is wrong.
When I prepare for interviews, I prefer a few points I can explain naturally over a script I have to remember word for word. For a technical interview, apply that approach to your reasoning: practice the method and let the numbers change.
How to practice before the interview
Work through a few probability problems aloud, including your assumptions
Practice arithmetic accurately before adding time pressure
Run a quoting game with a partner and track every fill and position
Ask your partner to change one fact so you have to update your answer
Prepare two true examples of learning, judgment or collaboration
Finish each practice round by checking the arithmetic and asking where your explanation became hard to follow. If time is short, use the planning steps in how to prepare for an interview. For the behavioral portion, practice answering tough questions without sounding rehearsed.
Want help explaining your experience clearly?
A market-making interview can include behavioral questions alongside technical exercises. The Confident Interview Method helps you choose relevant examples and explain your decisions clearly. Use it for general interview preparation alongside your technical practice.
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Frequently asked questions
What are the main topics in market making interview questions?
Prepare for probability, expected value, bid-ask spreads, inventory risk and updating decisions with new information. The balance varies by firm and role, so check the job description and official preparation materials.
Do I need finance experience for a market making interview?
That depends on the role and employer. Some entry-level quantitative trading interviews emphasize reasoning, while experienced or specialist roles may require substantial product knowledge. Explain the knowledge you have honestly and prepare for the stated requirements.
Is there one correct spread in a market-making game?
Usually not without specific rules and assumptions. Your quote depends on fair value, uncertainty, size, inventory and the information available to other players. Explain why you chose it and what would make you change it.
How can I practice a market-making game?
Choose a simple uncertain payoff, quote a bid and ask, then have a partner trade against you and reveal new information. Track cash, inventory and settlement profit or loss after each round. Agree on size limits before trading.
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