Bollen, NicolasSmith, TomWhaley, Robert2015-12-130304-405Xhttp://hdl.handle.net/1885/78859The need to understand and measure the determinants of market maker bid/ask spreads is crucial in evaluating the merits of competing market structures and the fairness of market maker rents. This study develops a simple, parsimonious model for the marketKeywords: Bid/ask spread; Expected insurance cost; Inventory-holding premium; Semi-variance; Stochastic time to expirationModeling the bid/ask spread: measuring the inventory-holding premium200410.1016/S0304-405X(03)00169-72015-12-11