Trade Classification (Lee-Ready) - Quant Researcher Interview Question
Difficulty: Hard
Category: market_microstructure
Asked at: HRT, Virtu, Two Sigma, NYSE, Citadel Securities, NASDAQ, AQR Capital Management
Topics: market-microstructure, pandas, numpy, algorithms
Problem Description
The Lee-Ready algorithm is a foundational technique in market microstructure for inferring the direction of trades using only trade price and quote data. By classifying trades as buyer-initiated or seller-initiated based on their relationship to the bid-ask midpoint and previous price movements, researchers can analyze liquidity and order flow toxicity.
Task
Implement the function classify_trades(trade_prices, quote_bids, quote_asks) to determine trade direction (Buy: 1, Sell: -1, Unknown: 0) u
Practice this hard researcher interview question on MyntBit - the LeetCode for quants with 200+ quant interview questions for Jane Street, Citadel, Two Sigma, and other top quantitative finance firms.