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Bid-Ask Spread |
Also found in: Wikipedia | 0.02 sec. |
Bid-Ask Spread On an exchange, the difference between the highest price a buyer of a security or other asset is willing to pay and the lowest price a seller is willing to offer. Generally speaking, the more liquid an asset is, the lower the bid-ask spread is. As a result, currency, which is considered the most liquid asset, has an extremely low bid-ask spread. Bid-Ask Spread What Does Bid-Ask Spread Mean? The amount by which the ask price exceeds the bid price. Essentially, it is the difference between the highest price a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it. Investopedia explains Bid-Ask Spread As an example, if the bid price is $20 and the ask price is $21, the bid-ask spread is $1. The size of the spread from one asset to another will vary with the liquidity of the asset. For example, currency is considered the most liquid asset in the world; thus, currency spreads are very narrow (one-hundredth of a percent). In contrast, less liquid assets such as a small-cap stock will have wider spreads, sometimes as high as 1 to 2% of the asset's value. Related Terms: How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| With these advanced optimization and simulation techniques speeding the velocity of today's equity markets, we knew our pre-trade research needed to go beyond simple average bid-offer spread or price variance techniques," stated Tim Sargent, CFA, President of QSG. Positively for liquidity, the absolute number of reference names that are quoted in the CDS market increased over the period, while CDS bid-offer spreads compressed dramatically. The first catalogue of notes is already being quoted with a tight bid-offer spread. |
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