Market makers optimize for expected value ("EV"), capital efficiency, and risk-adjusted returns. This includes maximizing optionality, minimizing inventory risk, maintaining high capital utilization, and preserving asymmetric upside. Understanding how a market maker intends to generate profit is the single most important input when structuring an engagement. The more clearly you understand their incentive model, the better you can design terms that align their behavior with your objectives.
Lesson 12 of 90
What does a market maker optimize for internally?
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