medium · Market Microstructure
A trader observes a sequence of transaction prices: $25.00, $25.10, $25.00, $25.10, $25.00.
Using Roll's model, if the autocovariance of price changes is calculated to be -0.01, what is the estimated bid-ask spread?
- $0.20
- $0.10
- $0.04
- $0.01
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