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I have a question about bid-ask spread in an over-the-counter market. I have these data:

i   Spread      Midpoint    Imbalance   Ask         Bid         Total Ask    Total bid

7   -1.378094   -0.310953   1.000000    -1.000000   0.378094        0   1
10  -0.482757   1.254740    0.000000    1.013361    1.496118        1   1
11  -1.618707   -0.190646   1.000000    -1.000000   0.618707        0   1
11  -1.618707   -0.190646   1.000000    -1.000000   0.618707        0   1
10  0.635267    0.695728    0.000000    1.013361    0.378094        1   1
8   -2.308588   0.154294    1.000000    -1.000000   1.308588        0   1
5   -2.308588   0.154294    1.000000    -1.000000   1.308588        0   1

where i is the i-th agent that trades. I am considering both limit and market orders. When a market order occurs, ask/bid is equal to -1. However, I don't know if the spread is correct and what means a negative spread. Could you please help me to understand?

Thank you.

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It's tough to know for sure without knowing what OTC market these quotes are over. First off, the calculation of spread is a little funny as by the usual standard of bid-ask spread the calculations for spread are wrong (for i=7,11,8,5) as when you divide a negative number by a negative number it should be positive.

However, what is more odd, and gives us a clue about what is going on here, is that the ask price is negative. Usually a seller is not actual willing to pay you money to get rid of a... whatever this is. My guess is the -1 is a placeholder for when the OTC market maker is unwilling to make an ask price. Especially since this they all happen to be exactly -1. The spread calculation doesn't really make sense in the case where there is no ask.

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