Market Impact & Slippage Modeling: Eliminating Backtest Simulation Drift [2026]
Date Published
1. The Simulation-to-Production Chasm
The Almgren-Chriss Market Impact Formulation
In a backtest, executing 10 shares or 100,000 shares costs the same price on screen. In real markets, your own order consuming book liquidity shifts the price against you. Robert Almgren and Neil Chriss formulated the mathematics of optimal execution trajectories to balance market impact against volatility risk.
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