Quotes, Spreads, and Midpoints
The best bid and ask summarize immediately displayed trading opportunities. Their difference is observable; its interpretation depends on trade direction, size, fees, and subsequent prices.
Central questions
- What do quoted, effective, and realized spreads measure?
- When is the midpoint a useful reference price?
- How do locked, crossed, or empty books alter these definitions?
Planned model
Move quotes and trades through time while computing multiple spread measures and showing the reference price used by each.