How market makers earn and lose money: spread capture, rebates, adverse selection, inventory risk, optimal quoting models and options market making.
Market makers provide continuous two-sided quotes and are paid through spreads and rebates for bearing inventory and adverse selection risk.
We cover the economics, the models from Glosten-Milgrom to Avellaneda-Stoikov, and the practical risk management of modern electronic market making across asset classes.
Spread capture is only the starting point. A practitioner’s view of market-making economics: rebates, adverse selection, inventory risk, the models behind quoting and what 2025’s record revenues say about the business.
Research roadmap
Our editorial plan for this section. Published guides are linked; the rest are in research.
