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 ?
Execution costs include not only the more explicit trading costs such as commissions and bid-ask spreads but also the price impact of trades, that is, the unfavorable price moves that may occur after a trader decides to implement a trading strategy.
Analyzing the corn futures contracts traded at B3, we observe a large amplitude in the estimated bid-ask spreads.
In addition, with the greater liquidity in the Treasury market, we expect that the bid-ask spreads on the funds' ETF shares will be considerably lower," said Davis.
After Reg FD was implemented, several empirical studies showed a reduction in bid-ask spreads (e.
Currently the vast majority of CDS trading still takes place over the counter, where price formation lacks transparency and transaction costs are high, partly because investors must pay high bid-ask spreads.
Further compounding the problem is the inherently low profitability of the market-making business, given the tight bid-ask spreads.
Roll and Subrahmanyam (2010) found that competition among market makers lead to an increasing right-skewed distribution of bid-ask spreads and such spreads are associated to institutional holdings and the quantity of analysts that follow the company.
In practice of investment management three major sources of transaction costs are taken into account: commissions (and similar payments), bid-ask spreads and market impact (Elton, Gruber, Brown & Goetzmann, 2010, p.
Studies suggest that markets that switched to an anonymous broker environment have shown reduced bid-ask spreads.
Since a good investor protection environment will minimize the costs of information asymmetry, and thereby reduce the probability of trading against informed traders, liquidity providers will incur relatively lower costs and therefore offer narrower bid-ask spreads.
Bid-ask spreads have decreased over time and revenues to market-makers have decreased from 1.
Another key issue for the IILM Sukuk, which are expected to have maturities of up to one year, will be their bid-ask spreads in the secondary market.