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Level 9 · ◆◆◆◆ · ~13 min

The Glosten–Milgrom Spread

The Glosten–Milgrom Spread

"Put a number on adverse selection: a market maker who is perfectly competitive, risk-neutral and holds no inventory still has to quote a spread. Here is exactly how wide."

the Glosten–Milgrom modelBayesian updating on trade directionbid and ask as conditional expectationsthe probability of informed tradingwhy the spread persists without inventory or costs
🚀 You're jumping ahead. This builds on Adverse Selection — but play it now and you'll still earn full XP. If it feels steep, those make a gentler on-ramp.

A short lesson, then a quiz. ❤️×3 — a wrong answer costs a heart; finish with at least one left and the level is yours. Lose all three and you'll have to try again. Replay any time — XP and cleared levels are never lost.