The difference between the price at which a dealer will buy and sell. A wider spread signals a costlier, less liquid market.
Where you will meet it
Bid-ask spread comes up in 5 learning outcome notes across the FRM syllabus.
A few of them:
Foreign Exchange Markets FRM Part I · Financial markets and products
“The bid-ask spread is ask minus bid, often quoted in pips (0.0001 for most pairs).”
Liquidity and Leverage FRM Part II · Liquidity and treasury risk measurement and management
“Market (transaction) liquidity risk is the risk that a position cannot be sold or hedged quickly without paying a wide bid-ask spread or moving the price.”
Liquidity Risk Management FRM Part II · Risk management and investment management
“The quoted or effective bid-ask spread gives the cost of a sale as half the spread times the amount sold.”
Liquidity and Leverage FRM Part II · Liquidity and treasury risk measurement and management
“Liquidating a position costs about half the bid-ask spread, because you trade from the mid price to the bid or ask.”
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