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.

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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

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3
Q

Slippage Modelling

A

Can be done with the use of Limit Order Books.

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