4 Federal Reserve Bank of Atlanta E C O N O M I C R E V I E W Third Quarter 1998 Bid and ask quotes are prices at which dealers or market makers are willing to transact. A market maker is an individual or firm that risks its own capital to provide investors with immediacy of supply and demand. The bidask spread represents the cost to investors of transacting with the market maker. Investors pre...

This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid-ask spreads in the German mark (DM) prior to the creation of the currency union. This comes with a decrease in transaction volume in the euro rates relative to the previous DM rates. The starkest example is the DM(euro)/yen rate in which the spread has risen by almost two-thirds while...

In this paper, we study the dynamics of absolute return, trading volume and bid–ask spread after the trading halts using high-frequency data from the Shanghai Stock Exchange. We dealwith all three types of trading halts, namely intraday halts, one-day halts and inter-day halts, of 203 stocks in Shanghai Stock Exchange fromAugust 2009 to 2011.We find that absolute return, trading volume, and in ...

Bid and ask sizes at the top of the order book provide information on short-term price moves. Drawing from classical descriptions of the order book in terms of queues and order-arrival rates (Smith et al., 2003), we consider a diffusion model for the evolution of the best bid/ask queues. We compute the probability that the next price move is upward, conditional on the best bid/ask sizes, the hi...

This paper deals with numerical solutions to an impulse control problem arising from optimal portfolio liquidation with bid-ask spread and market price impact penalizing speedy execution trades. The corresponding dynamic programming (DP) equation is a quasi-variational inequality (QVI) with solvency constraint satisfied by the value function in the sense of constrained viscosity solutions. By t...

We investigate what can be learned from a purely phenomenological study of options prices without modelling assumptions. We fitted neural net (NN) models to LIFFE “ESX” European style FTSE 100 index options using daily data from 1992 to 1997. These non-parametric models reproduce the BlackScholes (BS) analytic model in terms of fit and performance measures using just the usual five inputs (S, X...