Buy-side quants have long struggled to understand and master the effect of a firm’s own trading on market prices – so-called ‘market impact’.
In particular, the challenge of trading out of big positions is sometimes compared to pushing an elephant into a swimming pool and hoping to avoid the splash. The standard approach for firms wanting an indication of how big a splash to expect has been to examine the impact of similar trades in the past.
But when firms look closely, they find few trades a
The week on Risk.net, June 16–22, 2017Receive this by email