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NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets

Which term describes the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept for a share?

This is the bid-ask spread. The bid is the highest price buyers offer and the ask is the lowest price sellers want, so the gap between them is the spread. A narrow spread normally indicates a liquid security.

  1. ABid-ask spreadCorrect
  2. BCircuit limit
  3. CFace value gap
  4. DImpact cost

Explanation

The highest buy quote is the bid and the lowest sell quote is the ask; their difference is the bid-ask spread. Impact cost is the cost of executing a given order size relative to the mid-price, not this difference itself.

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