# Market Maker Risk Management ⎊ Area ⎊ Resource 2

---

## What is the Inventory of Market Maker Risk Management?

Market makers continuously adjust their asset holdings as they quote bid and ask prices to facilitate trade flow. Managing this resulting inventory exposure, particularly in illiquid crypto pairs, is central to profitability. Unhedged inventory represents a direct exposure to adverse price movements.

## What is the Hedging of Market Maker Risk Management?

This involves systematic delta, gamma, and vega adjustments to neutralize the portfolio's sensitivity to small, medium, and large market shifts. Effective hedging requires low-latency access to execution venues and precise model inputs. The cost of hedging directly erodes the spread capture.

## What is the Exposure of Market Maker Risk Management?

Quantifying the net risk across all open derivative contracts and the underlying spot positions is a continuous operational requirement. Limiting maximum acceptable exposure to specific risk factors prevents catastrophic loss during rapid market dislocations.


---

## [Delta Gamma Vanna Volga](https://term.greeks.live/term/delta-gamma-vanna-volga/)

## [Maker-Taker Models](https://term.greeks.live/term/maker-taker-models/)

## [Order Book Data Interpretation Tools and Resources](https://term.greeks.live/term/order-book-data-interpretation-tools-and-resources/)

## [Automated Market Maker Hybrid](https://term.greeks.live/term/automated-market-maker-hybrid/)

## [Order Book Depth Effects](https://term.greeks.live/term/order-book-depth-effects/)

## [Order Book Architecture Evolution Trends](https://term.greeks.live/term/order-book-architecture-evolution-trends/)

## [Delta Hedging Manipulation](https://term.greeks.live/term/delta-hedging-manipulation/)

## [Confidential Order Books](https://term.greeks.live/term/confidential-order-books/)

## [Automated Market Maker Fees](https://term.greeks.live/term/automated-market-maker-fees/)

## [Term Structure Modeling](https://term.greeks.live/term/term-structure-modeling/)

## [Automated Market Maker Pricing](https://term.greeks.live/term/automated-market-maker-pricing/)

## [Automated Market Maker Design](https://term.greeks.live/term/automated-market-maker-design/)

## [Market Maker Profitability](https://term.greeks.live/term/market-maker-profitability/)

---

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---

**Original URL:** https://term.greeks.live/area/market-maker-risk-management/resource/2/