A spread is a difference between two prices or yields. Bid-ask spreads reflect that the most competitive buyers and sellers want to trade an asset at different prices. Yield spreads reflect a difference in bond tenors, credits, liquidity, optionality, or other features. Option spreads reflect views on prices beyond just positive or negative. Commodity spreads reflect time evolution of supply or demand or the gross producer margin for creating a product.

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### Spread betting risk management in backtesting in Python

My background is in Spread Betting. I know how to calculate my position size based on how far away my stop is from my entry, I calculate the amount per pip so that I only ever risk a fixed percentage ...
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I can't seem to understand how tick data works. Below is some tick data for a certain security (I got this data from a platform called MetaTrader). At 09:56:28 someone offered to sell at \$9.9. But ... 1answer 88 views ### Survival probabilities starting from CDS spreads How is that possible to get survival probabilities starting from CDS spread? Could you please provide me with a demonstration? What is more, is that true that CDS Zero type is necessary so as to get ... 0answers 26 views ### Estimating midpoint or realized spread from trade by trade data without order book data I am looking to estimate the realized spread defined as $$\text{realized spread} = 2D_k(ln(P_k) - ln(M_{k+5}))$$ Where$D_k$is 1 for buy transactions and -1 for sell transactions.$P_k$is the ... 0answers 16 views ### Bid-ask spread using transactions data [duplicate] In the absence of quotes data, I'm looking to calculate the realized bid-ask spread using (high-frequency) transactions data. Is there a standard method of doing this? Many thanks. 2answers 126 views ### What prevents market-makers to do speculative trades with much better conditions than other traders? Market-makers gain profit from the bid-ask spread. This means that they could place speculative positions without any cost (they pay the spread to themselves = zero cost). I assume there are laws ... 0answers 51 views ### Market maker hedging model I understand that most market makers maintain non directionality i.e. they always aim to be perfectly hedged. So if they take a long position in X, they will take an offsetting short position in a ... 0answers 33 views ### comparing volatilities of 2 different commodities when no delta is provided If I wanted to compare the relative volatilities of options on 2 different commodities, but the deltas are not provided, is it sufficient to compare by the % each commodities strike is in or out of ... 1answer 62 views ### Spread and volatility I look for any references where one consider how bid-ask spread depends on volatility (may be it is more correct to say 'volatility measure'). I would be grateful for any references. 1answer 33 views ### ETF bid/ask spread [duplicate] I was just wondering if someone could explain to me how an ETF market maker earns profit through the spread they collect while hedging the positions to be non-directional. For example I read somewhere ... 1answer 140 views ### Corwin-Schultz estimator of bid-ask spread I am reading a paper "A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices" cf.A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices The authors proposed ... 1answer 67 views ### How to calculate bid/ask spread for an index? I am trying to calculate implicit transaction costs for a newly launched portfolio, as per the definition from ESMA: "transaction costs may be calculated either by multiplying an estimate of ... 1answer 42 views ### Cap/Floor on a SpreadOption grid I have a spread option data from a broker. The rows are the following : STK ATM -0.5 -0.25 ... and the values are forward price ( the strikes used are absolute strike and the value of the raw STK is ... 1answer 313 views ### Asset Swap Spread A Bond's Asset Swap Spread is defined as the difference between Bond's Yield and the Risk free rate. Then I was told that, the Present value of the Bond's Asset ... 1answer 80 views ### How does this formula for the price of a bond in terms of forward rates work? I am currently reading Chapter 3 of Tuckman's 'Fixed Income Securities' and it states that we can write the price of a bond using its term structure in terms of forward rates but with periods of ... 4answers 202 views ### Downward Sloping Swap Spread Curve After observing swap spreads in the market, I have noticed that the swap spread curve is downward sloping. Why is this? I have tried looking around the internet for answers, but have not found ... 2answers 42 views ### How to correctly build a spread candlestick chart between two assets (avoid inconsistent OHLC) I just wondering how charting platforms plot spreads between two assets. For example, if we want two create spread chart between APPL / AMZN we can substract or divide each asset: if we divide two ... 0answers 59 views ### Zero Volatility Curve (Z-spread) and Non-zero Volatility Curve (OAS) When looking at credit risk for bonds, the measures that are often used -- depending on your purpose -- are the z-spread or the OAS spread. By definition, z-spread is the parallel shift from the zero-... 2answers 250 views ### Why do E-mini S&P 500 futures have small bid-ask spreads? I noticed that E-mini S&P 500 futures (ES) typically trade with a very narrow bid-ask spread of 1 tick. What contributes to this small bid-ask spread? I can think of two reasons: Lots of active ... 1answer 129 views ### Are bid-ask spreads in options related to bid-ask spreads in their underlying? If an underlying has a large bid-ask spread, does it mean that its options will have large bid-ask spreads too? Is there any relation between the bid-ask spreads of options and the bid-ask spreads of ... 2answers 778 views ### Why there is no Bid Ask Spread in Futures Markets? I heard that there is no bid-ask spread in futures markets. Could anyone explain why there would be no difference between the selling and buying price of a futures contract? Thanks in advance! 0answers 35 views ### Fitting a Spread into ARIMA AR(1) process I'm a newbie to econometrics. I've simply ran a regression and have coefficient values of the variables. I'm running a regression for a crypto data, and I've gotten the Spread of the variables. To ... 1answer 174 views ### Simulating Bid-Ask Spreads I would like to examine the impact of the volatility on the transaction costs (Bid-ask spread). In my case I would like to examine this for power prices. However, I don't have access to actual order ... 1answer 96 views ### Feature engineering for mid-price prediction - quickly changing features I'm training a fully-connected feed-forward neural network on HFT (limit order book) data to predict the midprice at timepoint$t+\Delta t$(assuming that$t$is the current moment, and$\Delta t$is ... 1answer 38 views ### Can the spread between option premium for bull call spread change over time? I have created a bull call spread. There was spread of 70 dollars between the option premium of 2 strikes I selected. Now the spread between option premium of 2 strikes is greater than 100 dollars. ... 0answers 49 views ### Price of Call & Put Spreads as Volatility Tends to Infinity in Bachelier Model In the standard Black Scholes model, as we take volatility to infinity, the price of call spreads goes to zero and the price of put spreads goes to the difference in strikes. I ran a simulation using ... 1answer 92 views ### Market Impact proportional to the bid-ask spread Empirical studies have shown that market impact can be linked to the following parameters: $$\mathcal{I}(Q) = \kappa \ . \ \sigma \ . \ (\frac{Q}{V})^\gamma + \alpha \ . \ \psi_{BA} ... 1answer 141 views ### Why is OLS based spread not reflective of actual difference? I'm trying to define and track the spread between two time series (data available here), for the purpose of learning pair trading basics. When running a cointegration test the two series seem to be ... 1answer 104 views ### Trading inside/ outside the spread Can anyone explain to me what trading inside/ outside the spread mean? And why are trades that occured outside the spread are to be considered anomalous? Thanks 0answers 31 views ### What's the industry standard/typical way to model contango or futures spreads? If you want to include futures spread either as a response or predictor, I would imagine you also need to include time to expiration somewhere in your model. What is the industry standard way to ... 1answer 40 views ### Spread determinants Knowing that bond A is more liquid that bond B, i.e higher volumes are traded on bond A, does this information have any impact on the spread? Can we say that the large volumes traded on A will ... 0answers 54 views ### Futures Carry for Index Spread Trade This question is about a leveraged trade involving index futures. Let's use an example of buying two contracts YM futures and selling three contracts RTY futures. CME will give the trade a margin ... 0answers 17 views ### Historical data on european corporate bonds [duplicate] I am trying to run a factor analysis on European corporate bonds and I need historical data since mid - late 90s on : 1.bonds listed 2.spread 3.firm´s total debt at the time 4.Sector of firm 5.... 1answer 408 views ### Calculation of the Bid-Ask Spread on Bloomberg I downloaded the bid-ask spread from Bloomberg, but did not check how they calculate them. Is it only the ask minus bid price or is it weighted in a way? I appreciate your help! 0answers 38 views ### What is a call-spread and its formula? I am attempting Mark Joshi's The Concepts and Practice of Mathematical Finance. In B.3 Project 1: Vanilla options in a Black-Scholes world, he asked the following question. We need to be sure that ... 0answers 55 views ### Pair Trade - Should stock order matter I am testing a simple pair trading algorithm and I'm having problems if I swap the stocks around. I don't know which stock should be X and which should be Y. When I swap them I get very different ... 1answer 177 views ### PDs for negative credit spreads My question is about credit spreads and the corresponding probability of default (PD). One of the most simple relations between credit spreads and PDs is (see e.g. ch7 in Malz(2011))$$ PD \approx \... 1answer 709 views ### The ETF trick - E-mini S&P 500 Futures In Advances in Financial Machine Learning, Marcos Lopez de Prado talk about what he call the ETF Trick. I understand it is about building a time series from another time serie, with the aim to reflect ... 1answer 148 views ### Does it make sense to adjust a bond spread for price/coupon effects? I have come across the practice, in the wild, of bond OAS being adjusted for the price of a bond. The idea expressed to me was something like the following. A$\$90$ corporate bond with a 10 yr ...
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It's written in a book by Giles Hewitt : " The bid-offer spread quoted on a Strangle in volatility terms will usually be wider than the ATM spread to the same maturity because strikes away from the ...
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### Turning a spread always-positive for profit calculations?

I have a strange problem. I am running a backtest on a strategy whose signal is based on a spread. Naturally, a spread can go negative or positive. If I try to calculate the log return of a difference ...
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### Relation between ATM, RR and BF

In FX derivative market, why does vol spread of ATM > RR > BF? ATM is the most liquid and intuitively it should have the lowest spread. Please help me in understanding the rational behind the above ...
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### Understanding Front-End Spreads (terminology, lingo, convention)

Would appreciate a clear explanation as to what the OIS/Tsy spread and the TU OIS spread is. I've seen it being talked about in Wall St research reports but can't seem to find good explanations on ...
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I am wading into pair trading concepts. Here is one article I've read. I understand for these strategies our intention is to go long on one asset and short another, however I do not understand what ...
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When I read up on swap spreads, the definition always goes something like this: The swap spread is the difference between the fixed leg of swap and a Treasury bond with the same maturity. So if the ...
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### Pricing a callable bond

I have read the Lehman Brother's paper on OAS which I mostly understand, they outline how to find the OAS for a callable bond of which the formula is effectively (ignoring refinancing costs): Market ...
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### How to convert a vector of bonds ZC Spreads into default spreads

If we consider a set of bonds issued by a given entity that are quoted on the market, one can get for each of those bonds a ZC spread on top of reference swap curve (say the bonds are in USD and so we ...
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I found a paper which uses inflation as an independant variable for credit spread. Unfortunately, the relationship is not explained in this paper. Further research got my to the paper of Kang/Pflueger ...
This is a beginner level question. I have a $spread = aluminium - 0.7*lead$ $s = a - 0.7*l$ I have two methods to calculate return on this spread: $return = (s_t - s_{t-1})/(a_t + 0.7*l_t)$ ...