A stock has lakh shares and ; take in (5.13). (a) Compute the predicted impact in bp for metaorders of 10,000, 50,000, 1 lakh and 2 lakh shares. (b) A strategy's gross edge per trade is 30 bp. Ignoring other costs, at what order size does impact consume the edge? (c) Compare executing in one day with executing on each of two days (same , , and assuming impact fully decays overnight). What fraction of the impact cost is saved, and what risk is added?
M05 · Problem 8 ★★ Check
Square-root impact, capacity and splitting
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