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——— ESSEC BBA FALL 2024 ——— DOUAE
CERTIFICATE
MCQ test
Mock exam - Business of markets
COURSES
A+ A-
SIMULATIONS
Results of the MCQ test
CONTESTS
Your score: 30 / 30 points
CASE
STUDIES Reminder: to be allowed to take the final exam, your best grade in the mock exam must be greater than the threshold of
18 / 30 in the mock exam.
EXAMS
Period 1
Question 1: Revenues of a market maker
Mock exam -
Financial Statement:
markets
The revenues of a market maker comes from her purchases and sales of securities made throughout the
day. The purchases have to be made at a lower price than the sales in order to make a profit from the market
Final exam - making activity.
Financial
markets The market maker's revenues at date t is measured by the difference between the value of her position at the
start of the day (generally €0) and the value of her position at the date t. The position of the market maker is
assessed at market value (not at book value).
Period 2
The figure below represents the evolution of the revenues of a market maker during a trading day.
Mock exam -
Financial
analysis
Final exam -
Financial
analysis
Period 3
Mock exam -
Business of
markets
Presentation
MCQ test
Question: What can explain a decrease in the revenues of a market maker over a given period?
Check the correct answer(s).
FAQ
Realized capital losses from purchase and sale of securities with an average purchase price greater than
the sale price (following a decrease in the market price).
Final exam - (5 points) ✓ Bravo!
Business of
markets Potential capital losses from an increase in the market price for a long position.
(-5 points)
COMMUNITY Potential capital losses from a decrease in the market price for a short position.
(-5 points)
Potential capital losses from a decrease in the market price for a long position.
(5 points) ✓ Bravo!
None of the above answers is correct.
(-10 points)
I do not wish to answer this question. (0 point)
Correction:
See the Financial leverage course for the functioning of a position with buying and selling securities on credit.
Question 2: Analysis of a market-maker's position
Statement:
The figure below shows the evolution of a market-maker's position during the trading day. His position is
measured in the number of securities that he bought or sold.
Question: Check the correct answer(s).
The market-maker's position has evolved according to the order flow during the day, which was
sometimes buyer, sometimes seller.
(3 points) ✓ Bravo!
A long position of the market maker results from a buyer market, and a short position of the market maker
results from a seller market.
(-5 points)
To rebalance his position during the day, the market maker must post limit buy orders (LMT type) with
lower price limits if the position is too long, and limit sell orders with higher price limits if the position is too
short.
(4 points) ✓ Bravo!
In order not to have a directional position after the market closes, the market maker must liquidate his
position at the end of the trading day by placing market orders (MKT type), sell orders in case of along
position and buy orders in case of short position.
(3 points) ✓ Bravo!
None of the above answers is correct.
(-10 points)
I do not wish to answer this question. (0 point)
Correction:
See the Financial leverage course for the functioning of a position with buying and selling securities on credit.
Question 3: Revenues of a market maker
Statement:
The revenues of a market maker comes from her purchases and sales of securities made throughout the
day. The purchases have to be made at a lower price than the sales in order to make a profit from the market
making activity.
The market maker's revenues at date t is measured by the difference between the value of her position at the
start of the day (generally €0) and the value of her position at date t. The market maker's position is
assessed at market value (not at book value).
The figure below represents the evolution of a market maker revenues during a trading day.
Question: Check the correct answer(s).
The market-maker's spread is defined as her best price proposition to buy and her best price proposition
to sell.
(2 points) ✓ Bravo!
The market's spread is defined as the best price proposition to buy and the best price proposition to sell
from all market participants.
(2 points) ✓ Bravo!
A lower participation of a market maker in the market (her spread being sometimes higher than that of the
market) leads to a drop in the revenues of her activity.
(3 points) ✓ Bravo!
The volatility of the revenues of a market maker can be explained by the volatility of the order flow arriving
on the market, more precisely the randomness related to the quantity of securities in the buy and sell market
orders (MKT type).
(3 points) ✓ Bravo!
None of the above answers is correct.
(-10 points)
I do not wish to answer this question. (0 point)
Correction:
See the Financial leverage course for the functioning of a position with buying and selling securities on credit.
End of the MCQ
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