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Quote shifted by inventory

Market makingEasy

A market maker values a contract at $42.3$ . Because of a long position, the market maker lowers both quotes by $0.2$ relative to a symmetric market with a half-spread of $0.5$ around fair value. What is the new ask?

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Hint

Start from the symmetric ask, then apply the shift.

Solution

The symmetric ask would be $42.3 + 0.5 = 42.8$ .
Lowering it by $0.2$ gives the new ask.
The new ask is $42.6$ .

Answer: $42.6$

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