Design
Designing a Market-Making Strategy for a New ETF
Overview
What this challenge is about.
You are a quantitative analyst at Nova Capital. The new ETF (ticker: AIRO) will track 30 AI and robotics stocks with daily rebalancing. The initial AUM is $200 million. Your task is to propose a market-making framework: determine optimal quote sizes, spread widths, and hedging frequency. You must also simulate the ETF's intraday price behavior using historical data of underlying stocks. Success means a strategy that minimizes adverse selection and inventory risk while providing competitive quotes.
The Brief
What you'll do, and what you'll demonstrate.
How should Nova Capital design a market-making strategy for its new AI and robotics ETF to balance liquidity provision with risk management?
Earning criteria — what you'll demonstrate
- Understand the role of market makers in ETF liquidity and price discovery
- Apply concepts of bid-ask spread, inventory risk, and adverse selection
- Design a quantitative strategy using historical data and simulation
- Evaluate trade-offs between profitability and risk in market making
Program Fit
Where this fits in your program.
Sharpens the same skills your degree expects you to demonstrate.
Skills
Skills you'll demonstrate.
Each one shows up on your verified credential.
Careers
Roles this prepares you for.
Real titles. Real skill bridges. Pick the one closest to your trajectory.
Career mappings coming soon.