The Average Quote Life signifies the mean duration that a price quote, issued by a liquidity provider in a request-for-quote (RFQ) system, remains active or executable before its automatic expiration or explicit cancellation. This metric quantifies the temporal viability of a specific crypto asset or derivative price offering.
Mechanism
This value is derived by calculating the arithmetic average of individual quote lifespans over a defined observation period. Each quote’s lifespan is the interval from its generation to its invalidation. Algorithmic pricing engines dynamically determine individual quote durations, influenced by real-time market volatility, available inventory, and counterparty credit assessments, which are then aggregated for the average calculation.
Methodology
Analyzing the average quote life provides critical insights into market microstructure and the responsiveness of pricing systems, particularly in volatile crypto environments. Trading strategies leverage this data to optimize order submission timing and size, thereby improving execution probability and minimizing the risk of adverse selection against rapidly expiring liquidity provisions.
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