Transaction Costs & Market Impact: Models & Analysis › Key Parameters
Michael BrenndoerferJanuary 8, 20261 min read
Quantitative FinanceAll chapters Part 14 of 15Strategy Development and Backtesting
Transaction Costs & Market Impact: Models & Analysis › Key ParametersOne section · Sections in this chapter3 / 16 ↓
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The key parameters for analyzing transaction costs are:
- Commission: Explicit fees paid to brokers for executing trades.
- Spread: The difference between the ask and bid prices (). Represents the cost of immediate execution.
- Slippage: The difference between the expected execution price and the actual execution price.
- VWAP: Volume-Weighted Average Price. The average price achieved when executing an order across multiple price levels.