The bid-ask spread:
A) Is the difference between the price the market maker is willing to sell a financial asset and the price the market maker is willing to buy a financial asset.
B) Reflects the amount of risk the market maker is assuming by making a market.
C) Is affected by the thickness of the market.
D) All of the above are correct.
E) None of the above.

Question

Quizplus · Accepted Answer

The bid-ask spread represents the difference between the buying price (bid) and selling price (ask) that a market maker offers, reflects the market maker's perceived risk, and is influenced by market liquidity or thickness.

The Bid-Ask Spread