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How is the price impact handled for illiquid securities?

Hi,

How is the price impact calculated in the backtest when making large transactions on illiquid securities? Or is it ignored entirely in the results?

If it does adjust the price then how is my impact eliminated from future transactions? I may be now owning the securities that exist in the historical data. This means that the point in history where the historical (real life) owner sold is invalid.

Regards

1 response

poorly. you'll likely get open orders that get closed end of day instead of having them fill. likewise the slippage will be very unreliable since they do not track bid/ask prices