Professional Documents
Culture Documents
In The Game
In The Game
Being the Diamond market maker, my strategy for trading is to maintain a minimal spread to encourage trades
with other market makers. The prices were set based on the probability of the last card being a diamond. In
other to also protect my returns, I intend to hedge by financing some purchases through proceeds from
shorting other suits with lower chances of being the last card.
Finally, I planned to buy stocks of suits with least revealed cards and sell suits of more revealed cards.
Being the Diamond Market-Maker, my main strategy for trading is to price my bids and asks
by estimating the expected price for each suit at every action and then to set the bids and
asks in a way that the fair price is exactly between them. Concerning the spreads, I intend to
have minimal spreads to be flexible to move the bids and asks according to my inventory
and to not provide arbitrage opportunities to the other market makers. The prices were set
based on the probability of the last card being a diamond. When my exposure to a specific
suit was high, I was decreasing both the bid and ask.
An important part of the game was the revealing of the cards, which means reveal of private
information. My approach to this is that it involves revealing private information, everything
else constant, which does not directly affect my probabilities, but it changes the
probabilities of the other players and so their fair prices. Specifically, the revelation of a
specific suit would make the other player lower the bids and asks. So, I intend to use this
strategy to persuade the market makers whose suits I could buy to lower their ask prices in
order to increase my inventory.
A major concern to this strategy will be the difference between expected public information
and private information especially when a market maker does not reveal a card from their
inventory and I also do not have the said card in my inventory or deck of cards. To guide me,
I intend to create a spreadsheet where I can track the fair prices of each suit’s contracts as
well as final suit’s probability, step by step as cards were revealed. This will allow me to
adjust my strategy and predictions throughout the game to exploit significant differences
between public prices and prices reflected by the cards in my hand.