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Symmetric quote

Market makingEasy

A market maker believes a contract is worth $50$ and quotes a symmetric two-way market with a half-spread of $3$ . What is the ask price?

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Hint

The ask sits above fair value by the half-spread.

Solution

A symmetric quote places the bid and the ask at equal distances from fair value.
The bid is $50 - 3 = 47$ and the ask is $50 + 3$ .
The ask price is $53$ .

Answer: $53$