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1k views

How to account for transaction costs in a simulated market environment?

I am simulating a market for my trading system. I have no ask-bid prices in my dataset and use adjusted close for both buy and sell price. To account for this I plan to use a relative transaction cost....
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how do you evaluate an FX market EMS?

My firm is investigating FX EMS systems to see if we can reduce execution costs for our trading strategies that involve FX (not low latency). The liquidity providers are a few major banks. We're ...
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Transaction Costs for Currency Pairs

I have been aggregating some tick data from Oanda's streaming API to try and get an idea of the relative cost and best time to trade different currency pairs. The idea was to plot the spread of the ...
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How to properly assess the costs of replicating an index via futures contracts?

I would like to validate this sentence, coming from a WSJ article: The cost of holding a Eurostoxx 50 future, for example, has climbed from an average of 0.07% of the contract value since 1998, ...
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How should I include the bid-ask spread as a transaction cost in a backtest?

I have two backtesting algorithms: One that uses bid and ask prices for signal generation. For example: Buy when $ask < threshold_1$ and sell when $bid > threshold_2$. Bid and ask prices are ...
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Typical coefficients uses in square-root model for market impact

The square-root model is widely used to model equity market impact. It assumes that volatility, traded volume, total volume, and a spread cost are the drivers of slippage. Jim Gatheral has an ...
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Magnitude of Transaction Cost for Institutional Investors

For my thesis, I'm writing about robust portfolio allocation. I have the idea to include a measure of transaction cost, since ignoring them seems too simplifying for a real-world problem. Comparing a ...
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formulating MVO with costs

I am trying to formulate this simple MVO utility function with a linear transaction cost penalty added using Quadprog in MATLAB tcost = 0.001; lambda = 4; mu = vector of expected returns (say 4x1) S ...
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Optimal Position Size with Transaction Costs given Forecast Mean and StDev

I have rather a challenging question. I'm hoping that someone can share their experience. I will build up the problem in steps. Let's start our thinking with the idea of a buy and hold strategy of ...
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When to adjust portfolio weights?

In portfolio allocation literature there is lot of effort made in obtaining 'better' portfolio weights, for example via improving parameter estimates, introducing Bayesian approaches, incorporating ...
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How low can HFT transaction costs go?

When evaluating an HFT strategy, transaction costs are clearly an important question. When looking at commercial discount brokers for retail clients, costs can be as low as 0.005 USD per share, but ...