Exercise · m01_execution.py

Execution cost = spread + impact + statutory charges

market_impact(book, side, qty) -> (avg_fill_price, slippage_bps) Send a market order of qty into an OrderBook. Return the volume-weighted average fill price and the slippage versus the mid BEFORE the order, in basis points, signed so that a cost is positive (buying above mid or selling below mid). If nothing fills, return (nan, nan). 1 bp = 0.01%.
round_trip_bps(price, qty, segment, rates, spread) -> float Cost of buying and immediately selling qty at price, in bps of the buy value: buy at price + spread/2, sell at price - spread/2, plus all charges from m01_costs_tax.trade_costs.

Check: cd exercises && .venv/bin/python -m pytest modules/M01-market-structure/tests

Tests (4)

test_market_impact_buy_and_sell
test_impact_is_increasing_and_convex_in_size
test_impact_empty_book
test_round_trip_bps

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"""Exercise 1.4: execution cost = spread + impact + statutory charges.

1) market_impact(book, side, qty) -> (avg_fill_price, slippage_bps)
   Send a market order of `qty` into an OrderBook. Return the volume-weighted
   average fill price and the slippage versus the mid BEFORE the order, in
   basis points, signed so that a cost is positive (buying above mid or
   selling below mid). If nothing fills, return (nan, nan). 1 bp = 0.01%.

2) round_trip_bps(price, qty, segment, rates, spread) -> float
   Cost of buying and immediately selling `qty` at `price`, in bps of the buy
   value: buy at price + spread/2, sell at price - spread/2, plus all charges
   from m01_costs_tax.trade_costs.

Check: cd exercises && .venv/bin/python -m pytest modules/M01-market-structure/tests
"""

import math

from m01_costs_tax import trade_costs  # noqa: F401
from m01_order_book import OrderBook  # noqa: F401


def market_impact(book: "OrderBook", side: str, qty: int) -> tuple[float, float]:
    raise NotImplementedError


def round_trip_bps(price: float, qty: float, segment: str, rates: dict, spread: float) -> float:
    raise NotImplementedError

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