What is market making?
Market making involves quoting prices to buy and sell while managing inventory and risk. It helps students study how liquidity, spreads, and uncertainty interact.
Beginner explanation
A spread can reflect uncertainty, costs, competition, and inventory risk; it is not a guaranteed return.
Student exercise
Compare two hypothetical spreads and list which risks could make one wider.
Sources
Use SEC market structure resources for primary context.
Prerequisite math and programming
Use algebra, probability, descriptive statistics, and basic Python before adding model complexity. Learn one concept at a time and retain every assumption.
Common mistakes
Do not confuse a historical result with a forecast, hide data transformations, or omit costs, limitations, and a baseline comparison.
Simple student exercise
Write a small reproducible analysis with a documented public input, one calculation, one labeled chart, and three limits on what the result can establish.
Competition relevance
IQIC reviewers need to understand a team’s method, evidence, assumptions, and limitations. Start with the competition overview.