Just wanted confirmation that I got my IS right.
explicit costs = self explanatory
P/L = (shares exec/shares ordered)*((exec price - decision price)/decision price)
delay = (shares exec/shares ordered)*((prev day close price - decision price)/decision price)
missed trade = (shares exec/shares ordered)*((final close - decision price)/decision price)
Total IS = (paper gain - actual gain) / paper investment
anything off here?
I’m not 100% sure of the terminology used, especially “decision price”. I think there is something wrong with your P/L cost and delay cost.
Assuming trading is done over 3 days:
Delay = closing (3rd day) - execution, and
P/L = execution - closing (2nd day)
Delay is A - B and P/L is B - C. The variable B is the same in both cases.
Also the denominator where you have ‘decision price’ is the closing price of the first day.
There are some mistakes: missed trade is shares NOT exec,.
If you have Secret Sauce look at the EX in there, it’s perfect.