Model and measure trading transaction costs
Company: Graham Capital
Role: Software Engineer
Category: Analytics & Experimentation
Difficulty: hard
Interview Round: Technical Screen
In an event-driven trading strategy, how do you model, estimate, and incorporate transaction costs? Break down commissions, spread, slippage, and market impact; explain ex-ante versus ex-post estimation; show how to adjust backtests, position sizing, and performance metrics; and describe robustness checks across liquidity and latency scenarios.
Quick Answer: This question evaluates a candidate's competency in modeling and measuring trading transaction costs—decomposing commissions, bid–ask spread, slippage, and market impact—and estimating them for backtests, position sizing, and live execution.