Problem bank
Problem 32 of 333MediumMarket MakingP032
Updating on a trade
You quote 10 bid, 11 ask on a security with prior mean 10.5. A counterparty hits your bid (sells to you at 10). How should you update your fair value? What if they did this twice in a row?
See the hint and solution with a free account
Every problem on Quant Engine is free, with a hint and a full worked solution. Making an account takes 30 seconds and no card. Then you can see them and track what you have solved.