medium · Quantitative Finance microstructure-arb
A market maker observes that the daily price-change serial covariance Cov(Δ P_t, Δ P_t-1) for a stock is -0.0025.
According to Roll's effective spread estimator, what is the implied effective bid-ask spread?
- 0.05
- The estimator is undefined.
- 0.01
- 0.10
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