We have already seen in class how, with some assumptions, a market maker can sell an option and then trade stock to delta hedge this option. However, delta hedging in this way incurs costs such as the fees associated with making a trade. The Avellaneda-Stoikov model allows market makers to hedge their risk by adjusting the bid/ask spread in order to encourage orders that offset their current portfolio's risk. This allows them to make use of their role as a market maker in order to avoid crossing the bid/ask spread when hedging their portfolio.