Markets, lesson 9
Informed traders
Every trade is a clue, and the spread pays for what it reveals.
You can find fair value as an average, quote around it, and count the half-spread that pays for informed traders.
Part 1. They've seen a die
Same dice game, one change: before you quote, the other side has looked at one of the two dice.
Make a market against someone who peekedLive
Part 2. A trade is a clue
Keep going with Pro
You've done the first part. Pro opens the rest of this lesson, and every other one.
Still to come
- A trade is a clue
- Quote what the trade would tell you
- Trade by trade
- A worked problem
- The same thing, for real
Next lessonInventoryShares you never chose to hold, and how far to lean your quotes.
Start lesson 10
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Adapted from the Quant Finance Lectures (CC BY 4.0).