Bid-Ask Spread
Computes the bid-ask spread of an asset: the difference between the ask (sell) price and the bid (buy) price, the midpoint between them and the spread as a percentage of that midpoint. The spread is the invisible cost of trading and a direct measure of liquidity: liquid instruments have a tight spread, illiquid ones a wide spread. As a percentage, it lets you compare the cost across assets of different prices. Enter the bid and ask prices.
Result
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Bid-Ask Spread
Computes the bid-ask spread of an asset: the difference between the ask (sell) price and the bid (buy) price, the midpoint between them and the spread as a percentage of that midpoint. The spread is the invisible cost of trading and a direct measure of liquidity: liquid instruments have a tight spread, illiquid ones a wide spread. As a percentage, it lets you compare the cost across assets of different prices. Enter the bid and ask prices.
The invisible toll on every trade
When you buy an asset at market and sell it right after, you lose money even though the price hasn't moved. The culprit is the bid-ask spread: the difference between the price someone wants to sell at and the one someone wants to buy at. It's the toll you pay crossing from the bid to the ask, and the profit of those who provide liquidity.
The spread is also the most honest gauge of liquidity. Heavily traded assets, like large stocks, have spreads of cents; forgotten or complex instruments can have spreads that eat several percent of the value. That's why measuring the spread as a percentage matters: it lets you compare the real cost of trading across assets with completely different prices.
Enter the bid (buy) and ask (sell) prices. The tool returns the absolute spread, the midpoint between the two and the spread as a percentage of that midpoint. For anyone who trades often, this cost adds up fast, so knowing it before entering and exiting a position is part of the game.
Related Tools
Effective Spread (Microstructure)
Computes the effective spread of a trade: twice the distance between the price at which the trade actually executed and the midpoint between the best bid and best ask at that moment. Unlike the quoted spread, which measures the bid-ask difference, the effective spread captures the real cost the investor paid, accounting for where the order actually filled in the book. The result comes in absolute value and as a percentage of the midpoint. Enter the trade price and the midpoint.
Roll Spread Estimator
Computes Roll's effective spread estimator from a price series: 2 times the square root of the negative serial covariance between consecutive price changes. The intuition, from Richard Roll in 1984, is that the back-and-forth between buying and selling (the bid-ask bounce) creates a negative correlation in very short-term returns, and the size of that correlation reveals the implied spread. When the covariance isn't negative, the estimator is undefined and returns zero. Enter the price series.
G-Spread (Government Spread)
Computes the G-spread, the difference between a bond's yield and the yield of a government bond of comparable maturity. It's the most direct measure of a bond's credit risk premium: how much extra the market demands to lend to a corporate issuer instead of the treasury. The result comes in basis points, the standard unit of the credit market. Enter the bond's yield and the reference government bond's yield.
Z-spread (Zero-Volatility Spread)
Computes a bond's Z-spread: the constant spread added to the entire zero (spot) rate curve so the present value of its cashflows equals the market price. Unlike the nominal spread, which uses a single point, it accounts for the whole shape of the curve; for an option-free bond the Z-spread equals the OAS. Enter the cashflow times and amounts, the zero rate at each node and the price; the result is in basis points.
Amihud Illiquidity (ILLIQ)
Computes the Amihud (2002) illiquidity measure: the average of the ratio of the absolute daily return to the dollar trading volume, scaled by one million as is convention. The intuition is that, in illiquid assets, a small volume already moves the price a lot — so the higher the ratio, the more illiquid the asset. It's one of the most used liquidity measures in research, since it needs only daily price and volume data. Enter the lists of returns in percent and dollar volumes.
Equity Risk Premium (ERP)
Computes the equity risk premium: the extra return expected from investing in stocks rather than the risk-free rate. It's simply the expected market return minus the risk-free rate, and it serves as the central building block of the CAPM, multiplied by beta to estimate an asset's required return. The larger the premium, the more the market charges to take on equity risk. Enter the expected market return and the risk-free rate.
The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.