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Market Making

Dice and Cards Market Making Game

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Market Making Game ~6 min
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Overview
Cards and dice are a classic trading interview topic, and this game turns them into a live expected value exercise. One or two cards and one or two dice sit face down on the table, and the market quotes a price for the product of all their values. Before each round you answer standard deviation questions about the setup, then you decide whether the quoted market is too high or too low and buy or sell accordingly. The cards and dice flash face up for a few seconds before hiding again, so you compute your true profit or loss from memory. Cards are not replaced between reveals, so the expected value shifts as the game goes on. You start with 500,000 points and trade across several rounds to finish as high as you can.
Example: pricing a product of unknowns
Cards and dice go face down and the market is quoted on the product of all their values, not the sum, so the distribution is far wider than it looks. The game asks you for the standard deviation on its own screen first, and then quotes, which is the moment below: you take a side at whatever size you want.
Two cards average 7 each and two dice average 3.5 each, so the table is worth about 600. Being offered it at 560 makes you buy the offer.
Game Phases
1
Answer the pre-game questions Each round opens with typical interview questions on the standard deviation of the current dice and card setup. Work them out before any trading begins.
2
Read the market The game quotes a two-sided market for the product of every card and dice value. Compute the expected value of that product and compare it to the quote.
3
Buy or sell Buy if you think the true value sits above the market, sell if it sits below, and choose how many shares to trade to size your edge.
4
Reveal and settle The cards and dice flash face up for a few seconds, then hide. Work out your actual profit or loss from what you saw and submit it. Cards are not replaced, so the odds shift each round.
More Practice