The bid-ask spread exists because of ________.

Question

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The bid-ask spread is the difference between the highest price a buyer is willing to pay for a security (bid) and the lowest price a seller is willing to accept (ask). This spread exists because market makers, or dealers, need to cover their expenses and make a profit. They must be compensated for the risk they take on by holding assets in inventory and providing liquidity to the markets. The bid-ask spread is a necessary part of how markets function, and helps ensure that buyers and sellers can enter and exit trades with ease.

The Bid-Ask Spread Exists Because of ________