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Avellaneda & Stoikov (2006) give the canonical inventory-based market-making recipe: reservation price plus intensity-calibrated bid/ask in a limit order book. Plain-language intro. Not investment advice.
If you only remember one academic market-making paper, it is often this one. How should a liquidity provider set bid and ask when inventory risk and fill intensity both matter?
High-frequency trading in a limit order book (Marco Avellaneda, Sasha Stoikov, 2006) introduces the canonical reservation price plus intensity-calibrated quotes in a limit-order-book setting.
Fit for learners: Canonical inventory-based market-making via reservation price and intensity-calibrated bid/ask quotes in a LOB.
This Hub note is a plain-language intro. Not investment advice.
Read the PDF for derivation sketches and numerical examples. Blog “AS implementations” vary wildly—verify assumptions yourself for study only.
This is the shared vocabulary for almost every later inventory MM note: reservation price, inventory penalty, intensity, bid/ask asymmetry. After-work Python practice becomes clearer once those words mean something concrete.
Healthy mini-project: code reservation price as a function of inventory on a grid, plot it, and stop—no venue connection.
Landing: Cornell ORIE PDF
Not investment advice. Avellaneda–Stoikov is educational research. It is not a licence to run market-making code with real capital.
Single course CTA: SoloQuant Academy’s Introduction to Python Programming—get fluent with functions and plots first; then the reservation-price notebook makes sense.