Market on a Number You Don't Know

Question

"Make me a market on the number of commercial airliners airborne over Europe right now." You have no data, only reasoning. Construct your quote, and explain what determines the width you show.

Accepted Answer

Step 1, theo by decomposition. European airspace handles on the order of 30,000 commercial flights a day; a flight averages roughly 2 hours airborne; traffic concentrates into maybe 16 active hours. Average airborne at a daytime moment: approx frac30,000 times 216 approx 3,750. Call theo ≈ 3,000–4,000 (less at night, say which regime you're quoting). The chain of estimates matters more than the exact product. Step 2, width from uncertainty. Each factor could be off by 30–50%, so an honest market is something like 2,500 bid / 5,500 offer: a band you would genuinely trade either side of. Quoting 3,600 / 3,800 is theater: real-time flight-tracking data exists, so a tight market invites exactly the counterparty who has it. That's adverse selection in its purest form, the people who trade with a confident quote are the ones who know. Step 3, be a trader about it. Never show a market you wouldn't deal on both sides of; if pressed tighter, cut size rather than lie about your confidence. If the interviewer instantly lifts your offer, update: re-mark theo upward, skew, and ask yourself what they know. Grading criteria in the room: a structured estimate, width that matches stated uncertainty

Market on a Number You Don't Know

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