Bid-ask spread
Quick definition
The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security.
What is Bid-ask spread?
The bid-ask spread represents the cost of transacting in a financial market.
A narrower spread typically indicates a liquid and competitive market, where numerous participants actively trade the security. Conversely, wider spreads often occur in illiquid or volatile markets, where fewer participants result in greater uncertainty about the fair market value.
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