One of the dimensions of liquidity is width, which is measures the size of a trade that can be arranged at a given cost.[Fill in the blank]True/False
A
True
B
False

Question

One of the dimensions of liquidity is width, which is measures the size of a trade that can be arranged at a given cost.[Fill in the blank]

BlackTom AI · Accepted Answer

Width in liquidity terminology refers to the maximum trade size that can be executed at a specified transaction cost (or without moving the price appreciably), so the statement is True.

1) Relevant knowledge points and concepts:
- Liquidity has multiple dimensions: tightness (transaction cost or bid–ask spread), depth/width (ability to execute large trades), immediacy (speed of execution), breadth (number of active counterparties), and resiliency (speed of price recovery).
- “Width” (as used in many market‑microstructure contexts) describes how large a single trade can be arranged at a given cost level before market impact or price slippage increases materially.

2) Step‑by‑step reasoning:
- If a market lets you buy or sell a small amount at the quoted price with minimal cost, that describes tightness. But when you consider larger sizes, you test how much volume the market can absorb at essentially the same cost — that is width.
- Example: Assume quoted price for a security implies a round‑trip cost of 0.05% for trades up to $100,000. For trades larger than $100,000 the cost jumps to 0.25% because you must walk the book. The “width” at the 0.05% cost level is therefore $100,000 — the size that can be arranged at that cost.

3) Intermediate steps / illustration:
- Determine cost threshold (e.g., 0.05%).
- Find the maximum trade size that can be executed while keeping cost ≤ threshold (e.g., $100k).
- That maximum size is the width for that cost level.

4) Why the correct answer is correct:
- The definition above matches the statement: width measures the size of a trade that can be arranged at a given cost. It specifically addresses capacity at a specified cost before price impact increases.

5) Why the other option (False) is incorrect:
- Marking False would imply width does not measure trade size at a given cost; that contradicts the accepted liquidity‑dimension definition described above.

Conclusion: The statement is True, which matches the provided answer.

One of the dimensions of liquidity is width, which is measures the size of a trade that can be arranged at a given cost.[Fill in the blank]True/False

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