DEFINITION of 'Quotation'

Quotations refer to the most recent sale price a stock, bond, or any other asset traded. In addition, most asset classes also quote the bid and ask price that determines the final sale price. The bid is defined as the highest price a buyer is willing to pay for the assets while the ask is the highest price a seller is willing to receive for selling. It's common for stable, liquid assets to record narrow bid-ask spreads in a normal trading environment. The pair will usually divert following systemic concerns like geopolitical events or broad market downturns. The onset of volatility and uncertainty moves the supply and demand mechanisms undermining quotations into flux. 

BREAKING DOWN 'Quotation'

Quotations represent two pieces of information for most asset classes: the price an investor would need to pay to purchase an asset at a particular moment in time (the lowest price "asked" by sellers) and the price an investor would receive for the same asset if they sold it at the same time (the highest "bid" by potential buyers). Together, the difference between the two represents the liquidity cost an investor incurs when trading an asset since they must buy at the bid price and sell at the ask price. As the price of an asset starts to fall, markets will see a concurrent divergence in the bid and ask prices. That wider spread can make assets less liquid and difficult to move during broad market volatility. 

Quotations aren't confined just to bid and ask prices. They also include high, low, open and close values for a given day. A basic stock quote highlights these key data points to provide context around the current day's movements. The spread between the open and close or high and low is often a reflection of the ongoing trend. For example, sharp changes between the open and close signals strong upward momentum and an interesting trading opportunity. 

Other Types of Quotations

Most investors won't hesitate to connect the term quotation with stock prices, but many other asset classes record quotes of the last price traded. For instance, fixed income markets also quote the bid and ask prices of a bond during regular trading hours. In addition to bid-ask spreads, bond quotes showcase the asset's par value and yield to maturity. Par value is often converted to a numeric value and multiplied by 10 to determine the cost of a bond. Futures contracts and commodities also use quotes to provide investors and the finance audience relevant information about the asset.

RELATED TERMS
  1. European Currency Quotation

    A European currency quotation is an indirect quotation in the ...
  2. Bid and Ask

    The term "bid and ask" refers to a two-way price quotation that ...
  3. Ask Size

    Ask size is the amount of a security that a market maker is offering ...
  4. Bid

    A bid is an offer made by an investor, trader or dealer to buy ...
  5. Quoted Price

    A quoted price is the most recent price at which an investment ...
  6. Bid Price

    Bid price is the price a buyer is willing to pay for a security. ...
Related Articles
  1. Trading

    The Basics of the Bid-Ask Spread

    The bid-ask spread is the difference between the bid price and ask price prices for a particular security.
  2. Insights

    How to Understand a Stock Quote

    Trading stocks is a popular way to invest money. Learn the details of a quote and what its information suggests, including pricing data and charts.
  3. Investing

    Understanding financial liquidity

    Financial liquidity comes into play for companies, your personal finances, investing, and the financial markets. However, assets and investments have varying liquidity levels.
  4. Investing

    How To Create A Real Estate Bidding War

    There are still many areas in the United States that are attractive enough to buyers that you can start a good, old-fashioned bidding war on your property.
  5. Trading

    Understanding the spread in retail currency exchange rates

    Understanding how exchange rates are calculated and shopping around for the best rates may mitigate the effect of wide spreads in the retail forex market.
  6. Investing

    Understanding Liquidity Risk

    Make sure that your trades are safe by learning how to measure the liquidity risk.
RELATED FAQS
  1. Are Bid Prices of T-Bills Higher Than the Ask?

    An ask price of a security should typically be higher than the bid price. Find out why the method of quoting bid/ask of T-bills ... Read Answer >>
  2. What types of stocks have a large difference between bid and ask prices?

    Find out which factors influence bid-ask spread width. Learn why some stocks have large spreads between bid and ask prices, ... Read Answer >>
  3. What number of shares determines adequate liquidity for a stock?

    Learn how the liquidity of a company's shares is generally affected by bid-ask spread and trading volume of shares bought ... Read Answer >>
Trading Center