Trading Interview - Confidence Interval

Suppose the interviewer asks you to make a market on X. Then the interviewer follows up: how confident are you in your answer? Suppose you say 90%.

1. Is your % of confidence supposed to correspond to a confidence interval here?

2. Is this interval supposed to be large or small (relative to X) for a high confidence interval %?

For #2, I've seen conflicting information on this website. For example, there is a post on this website that says, "Just remember that a higher confidence interval translates to a wider market." Yet, in the comments, someone else says, "The idea is that for things you're more confident in, you can make a tighter market." I can't link to the post since I'm new on this website, but the topic is "Interview Question: Make A Market On Anything."

Can someone with interview expertise please confirm what the right answers should be to the above 2 questions (especially #2)? On one hand, a large interval means you're very confident in the interval, since the large interval covers more space than a tight interval and hence the true value should (almost) definitely be covered. On the other hand, a tight interval means you are very confident that you don't need the interval to cover excess range, since you are confident about the true value being within the tighter range.

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Comments (1)

Jan 29, 2019