Slippage (again) Flashcards
1
Q
Slippage
A
The difference between the expected execution price (e.g. best bid or best ask) and execution price.
Execution price: the (average) price you traded at; we won’t find this in backtesting so we will be conservative in our assumption.
2
Q
Conservative
A
If the actual execution price differs from the expected one, either:
* The execution price was better (positive slippage)
* The execution price was worse (negative slippage)
then we will be conservative and assume negative slippage:
* go long (buy): execution higher than expected price
* go short (sell) execution is lower than expected price
3
Q
Slippage Modelling
A
Can be done with the use of Limit Order Books.