bid-ask spread

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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

See spread.
References in periodicals archive ?
However, when analyzing the 16 to 45 days window prior to contract expiration, it is possible to notice an increase in the bid ask spread for the May 2016 contract (C K06).
Chart 2) CORRELATION COEFFICIENTS BETWEEN THE BID ASK SPREAD ESTIMATES, FOR B3 MARKETS (BOTTOM) AND FOR CBOT MARKETS (TOP) AQS ROLL CDP CSS TW CFTC AQS 0,730 0,780 0,678 0,680 0,602 ROLL 0,170 0,998 0,907 0,867 0,800 CDP 0,287 0,995 0,908 0,859 0,790 CSS 0,210 0,941 0,915 0,818 0,735 TW 0,460 0,367 0,562 0,337 0,850 CFTC 0,560 0,340 0,344 0,267 0,626 * ROLL stands for Roll model; CSS stands for the Choi, Salandro, and Shastri model; CDP stands for Chu, Ding, and Pyun model; TW stands for the Thompson and Walley model; CFTC stands for the Wang, Yau, and Baptiste model and AQS stands for the Absolute Quoted Spread.
examines the influence of Earnings management on Bid ask spread and concludes that the liquidity providers react to the aggressive accounting practices of earnings management and tend to widen their bid-ask spreads to protect themselves.
Testing their sample they concluded that better earnings management overcome this effect and by having a greater bid ask spread and ultimately suffers lower stock liquidity.
Several papers have developed theoretical models that make predictions about the effect insider trading has on the bid ask spread.
t] is the return calculated with the inferior limit of the bid ask spread and [RD.
1992, `Empirical evidence on the impact of the bid ask spread on the characteristics of CRSP daily returns', Journal of Financial Research, vol.
Approximately half of all December, 1995 and January, 1996 closes were reported to have occurred inside the closing bid ask spread compared to approximately 40% of the December, 1996 and January, 1997 closes inside the spread.
Liquid securities have lower bid ask spreads and volatility (daily standard deviation) is increasing in the level of liquidity.
The significance of the dummy variable in this preliminary exercise indicates that the Tiananmen Square conflict is associated with a significant structural break in the relationship between bid ask spreads and country risk.
If we assume that the increase in demand for the options from A1([lambda]) to A2([lambda]), for a fixed supply B([lambda]), is such that the following three assumptions are satisfied then it is possible to give the necessary and sufficient conditions under which increased transactions demand yield increased volume and narrower bid ask spreads.