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Daily edge net of costs

Market makingEasy

A market maker completes an average of $400$ trades per day, each with an expected edge of $0.35$ dollars against fair value. Fixed costs are $40$ dollars per day. What is the expected daily profit in dollars?

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Hint

Total edge first, then the fixed costs.

Solution

The expected total edge is $400 \times 0.35 = 140$ .
The fixed costs are $40$ .
The expected daily profit is $140 - 40 = 100$ .

Answer: $100$

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