Bid-Ask Spread

The difference between the bid and ask prices for a commodity or asset which is usually indicative of its liquidity value.

The bid-ask spread is the measurable and often graphically representable difference between what is quoted on an asset or stock and what buyers are willing to bid for it. Specifically, the spread operates on the idea that any typical exchange situation involves a buyer who wants to pay less than the asking price. Thus, the bid-ask spread represents how much the asking price is greater than the bidding price, which indicates the perceived value of the asset in question from the perspective of the buyer.

The bid-ask spread is one of the components of liquidity and can be measured in percentage in relation to the lowest asking price.